Virtually every analyst who follows Apple has jumped on the bigger iPhone bandwagon, asserting that the Cupertino, Calif. firm will step into the quickly-growing large-screen market this year.
"There's demand for these devices," said Ramon Llamas, analyst with IDC, referring to smartphones with larger displays. "Line up the numbers and it says to me, there's a market that shows tremendous growth and there's a niche for these."
Last week, the Wall Street Journal (subscription required), citing the usual unnamed sources, said Apple is planning to launch a pair of larger iPhones in 2014, one bigger than 4.5 inches, the other larger than 5 inches.
The iPhone 5-series, including 2013's 5S and 5C, sport a display of 4-in. measured diagonally, an increase from the 3.5-in. Apple used from 2007 until 2012.
Most sell-side analysts on Wall Street expect that Apple will enter the larger-phone market this year -- although those bets stem as much from their harping about Apple's lack of new products as any prognostication -- but industry analysts have almost unanimously followed suit.
The talk started with the usual leaks from Asian component suppliers, said Bob O'Donnell, chief analyst at Technalysis Research. "For Apple to build something they have to talk to the supply chain, and build screens, even for prototypes. Inevitably, the leaks start at display makers, like LG Display, AU Optronics and the others," said O'Donnell.
As demonstrated last year when pundits nailed almost every aspect of the iPhone 5S, it's impossible for Apple to keep a new product under wraps unless there's a long lead time between announcement and retail debut. One of the last times Apple was able to keep secrets, well, secret was the introduction of the original iPhone in 2007, when more than five months passed after Jobs pulled it from his pocket before Apple started selling the new device.
But a larger iPhone makes much sense, analysts argued.
As Llamas noted, the demand for such devices has accelerated. According to IDC, about 4 million larger-sized smartphones -- dubbed "phablets" by some to denote devices with screens of 5 inches and more -- were sold in 2012, a number that jumped to around 16.5 million in 2013 and will hit 30 million this year. Even that estimate, Llamas said, "now looks to be conservative."
O'Donnell was even more bullish on the category.
"The phablet market will account for one in three smartphones by 2018," O'Donnell predicted. "That's a huge market population that no vendor can ignore."
While the landscape is littered with predictions of what Apple will do -- or, in many cases, what outsiders think Apple must do -- O'Donnell, Llamas and others think the case for a larger iPhone is very solid.
"It makes a lot of logical sense, especially as smartphones are becoming less and less phone and more and more computing devices," said O'Donnell, striking a stance he has held for some time and spelled out in a piece he wrote two weeks ago for the analyst-centric Techpinions.
To O'Donnell, those who sneer at phablets, who poke fun at people who hold what they see as enormous phones to heads, miss the point. "There's only a small portion of time spent with a smartphone talking on it," said O'Donnell. "When you accept that smartphones are used primarily for information access, then a larger screen makes sense."
Other arguments for Apple growing the iPhone's screen -- while still offering the now-standard 4-in. display in other models -- range from the Cupertino, Calif. company's desire to be a major player in China specifically, Asia in general, where larger screens are currently most popular, to its renewed push of larger-screen tablets, best illustrated by the thinner, lighter iPad Air.
Not that North Americans have shunned the bigger phones.
Nearly a fourth of U.S. consumers who upgraded their phones between June and December 2013 picked a phone with a screen that was 5 inches or larger, said Carolina Milanesi, the strategic insight director of Kantar Worldpanel ComTech, citing her firm's regular consumer surveys.
And Apple is losing out, she said. "Twenty-six percent of U.S. consumers upgrading to a device with a screen of 4.5 inches or larger are coming from Apple and going to Android," Milanesi said in an email.
She thinks Apple will go bigger in 2014, too. "I struggle to see them go beyond 5.5 inches, though," Milanesi said. "I think a larger phone would be a nice companion to a larger iPad, if you believe the talk of a 12-in. iPad."
As smartphones acquire larger screens, they will begin to disrupt sales of the smallest tablets, the experts said. A smartphone is almost always able to connect to the Internet, a plus when most tablets, especially those in the 8-in. and smaller form factor, are Wi-Fi only. And a 5-in. smartphone screen is close enough to a 7-in. tablet display to make the latter superfluous.
"This will spell trouble for the smaller tablet screen sizes," said Llamas.
"With a 5-in. or 6-in. smartphone, I can get the vast majority of what I have in a tablet, plus network connectivity," echoed O'Donnell.
The toughest decisions for Apple will be how to handle the increased size and what resolution to pick, the analysts said. Ideally, an increase should not impact developers, not require them to rework their apps to make their wares fit the new size and/or resolution, but let them take advantage of the bigger canvas.
"How will apps scale?" wondered O'Donnell. "Apple is very particular about screen resolution." When Apple moved to a Retina-style screen for the iPhone 4, it quadrupled the pixel count by doubling the resolution in both dimensions, which resulted in a very smooth scaling for existing apps. For the iPhone 5 and its slightly-larger screen, Apple offered developers a stop-gap solution instead, one which used black bars to occupy the new real estate.
A move to phablet sizes, the experts said, could be eased by iOS 7, which introduced some resolution-independence to the OS, eliminating the need for costly, time-consuming updates to current apps.
O'Donnell expects that while iOS 7 will help developers adapt to changes in size or resolution, many will want to optimize their apps for the bigger screen. "That's why I think there's a good chance that this iPhone will be announced a fair bit before it's introduced," said O'Donnell, taking a page from Apple's 2007 playbook, when the company gave developers several months to build Web apps for the original iPhone.
"Apple's bread and butter is keeping the app developer community happy," concurred Llamas. "The size and resolution will be key considerations. The last thing Apple would want to do is put out an experience several steps back from what people are accustomed to. If Apple puts out [a larger iPhone] with a screen that looks like a 1980's video came, people will just say, 'We'll take a pass.'"
That wouldn't be good, not with Wall Street clamoring for something to drive substantial growth in Apple's revenue, the mantra for investors who have become disgruntled at the disappearance of the gravy train days when income soared and the stock price followed.
While those investors -- who are interested only in growth and pan Apple's enormous profits because they're not larger than before -- have told CEO Tim Cook he needs to find new product categories, whether iWatch or iTV or i-something else, a larger-sized iPhone would be the easiest and quickest sop.
"It's a classic case of better that they offer something, even if it eats their own children," said O'Donnell, referring to the chances that a larger iPhone will cannibalize sales of the now-hot iPad Mini. "To me, it's incredibly clear that this category [of larger smartphones] will shake things up."
But Apple, as always, will do things its way. Which could be very good for customers, if not enough to make Wall Street happy.
"Phablets are one reason why we'll probably see a larger-sized iPad," said O'Donnell. "It all fits together when you have choices from 3.5-in. to 12-in. for an iOS device, with the same experience across all those sizes."
Apple, naturally, plays its cards close. In an earnings call with Wall Street earlier this week, analysts tried to draw out Cook but with no more success than usual. "Are you willing to expand the product portfolio into new categories within the phone family?" asked Keith Bachman of BMO Capital Markets with a thinly-veiled question aimed at larger screens.
"We're willing to make any product that's a great product," replied Cook, sticking to the party line. "Where our line in the sand is, it's making something that's not fantastic."
Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is email@example.com.
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