If Apple wants the iPhone to continue to be competitive with devices running Android, it needs to increase the size of the iPhone's screen. Upstream component suppliers say that Apple's manufacturing partners in Asia have begun testing their production lines, and everything points to a small bump in the size of the iPhone's display.
When Apple launched the iPhone in 2007, its 3.5-inch display was outrageously big. It has since been surpassed by the large displays on Android devices, many of which come in at 3.7, 4.0, 4.3, and even 4.8 inches. Holding the iPhone 4 (or any iPhone, for that matter) next to a device such as the Motorola Droid X, which has a 4.3-inch display, makes the iPhone's display look downright puny.
DigiTimes reports that the next Apple iPhone will have a screen that measures 4 inches across the diagonal, an increase of 0.5 inches.
What's not clear is how Apple will adjust application performance on a slightly larger screen. DigiTimes has not reported what resolution the larger display might have, nor whether it will be a Retina Display. Apple hasn't confirmed this report.
This balances out a bit the reports from Bloomberg and the Wall Street Journal from earlier this week that suggest Apple will be making a smaller iPhone Nano. The chief selling point of the iPhone Nano is that it will be less expensive when compared to the iPhone 4, iPhone 5 (or whatever Apple calls the next iPhone).
The unannounced iPhone Nano would be about one-third the size of the iPhone 4 and would remove the Home button. In order to reach a lower price point, this newer device will use components borrowed from the current generation iPhone (which have been discounted at this point). Apple will reserve newer and more expensive components for the iPhone 5, for which it can charge a lot more.
Having a device with a lower cost -- especially after carrier subsidies -- would no doubt help Apple continue to fight against the mounting pile of cheaper, entry-level Android devices. But it would also help Apple to expand in markets where it traditionally hasn't penetrated well due to the high costs of its products.
It stands to reason that if Apple is going to create a smaller iPhone, it may as well make a bigger one. Does that mean we'll see a 3.2-incher and a 4.0-incher? Possibly.