Yes, Apple Knows the iPhone 6 Needs a Bigger Screen

The latest slides from Apple's trial show bigger screens mean bigger market growth.

Apr 8, 2014 at 10:02AM

The current iPhone 5s measures four inches diagonally. But that could change very soon. Source: Apple.

Apple's (NASDAQ:AAPL) investors and consumers have been looking for a bigger iPhone for a while now. Samsung dominates the large-phone category and offers a wide variety of device sizes, but Apple has been conservative, increasing its phone to just four inches when it launched the iPhone 5 last year.

But recent documents shared in a trial between Apple and Samsung show Apple knows how important a larger iPhone 6 could be in light of the competition.

"Consumers want what we don't have"
In slides obtained by Re/code, Apple showed fiscal 2014 data that points to an overall trend toward bigger phones, as well as devices that cost less than $300. A very blunt slide labeled "Consumers want what we don't have" showed that smartphone buyers are looking for devices with screens that are larger than four inches, and that the majority of growth was happening with devices cheaper than $300.

Smartphone growth is trending away from the iPhone's price and size. Source: Scribd via Re/code.

Further slides show that Apple, not surprisingly, knows consumers are looking for smartphones that are bigger and less expensive than its iPhone.

Apple Iphone
Apple knows consumers are looking for something more. Source: Scribd via Re/code.

While it's unusual to see Apple so honest about where it stands among the competition, the slides aren't all that revealing. Data from International Data Corporation shows the smartphone market grew by 38% in 2013, but Apple's growth was just 13%. But now we have actual confirmation that Apple knows what many consumers already know: The iPhone is expensive and it has a smaller screen than a lot of other devices.

Great. Now what?
Getting a glimpse into Apple's mind is good, but how does this help investors? For one, it means Apple no longer has an excuse not to release a larger screen for the iPhone 6. In fact, now that we all officially know a little insight into Apple's knowledge of consumer preferences, it would be pretty irresponsible for them not release a larger device. 

I'm trying to imagine the iPhone 6 debuting this fall and Apple revealing a brand-new high-end spec device with a four-inch screen, and then everyone's jaw drops because the device has a been-there-done-that feel to it. With all the articles surrounding a larger screen size, or two, and now these documents surfacing I can't see how the current screen size could possibly stick around for the iPhone 6.

OK, so let's (safely?) assume the iPhone 6 has a bigger screen and is released in early fall of this year. Brian Marshall, an analyst at ISI Group, thinks there's a lot of large-screen iPhone demand pent up among consumers, and I agree. Marshall said in an investor note, acquired by Apple Insider, that the demand could translate into a 14% upgrade rate for the iPhone 6, among current iPhone users. According to his calculations, typical upgrade percentages among iPhone users are about 9% in an average quarter.

Whether Marshall's predictions prove true, I still think the pent-up demand theory is very plausible. Loyal iPhone users, of which there are many, will likely be offered the largest iPhone to date some time this year, and for many it'll be a hard offer to pass up.

"One more thing" Apple needs this year
Aside from a new and bigger iPhone 6, Apple investors are likely hoping the company enters the burgeoning wearable tech market this year. Apple hasn't announced anything yet, but Google recently introduced a new OS specifically for wearables called Android Wear. Investors don't need to wait for Apple to get on board with wearables, though. Click here to get the full story on this growing tech trend right now.

Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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