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Make Up Your Mind: Should Devices Get Bigger or Smaller?

By Evan Niu, CFA - Apr 17, 2013 at 1:00AM

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Pundits continue to call for bigger devices like phablets. At the same time, they're also saying phones are too big, which is why consumers may be interested in wearable computing devices. Which one is it?

There's been a lot of talk about the growing consumer trend toward phablets, oversized smartphones that approach tablets in dimensions. Analyst continue to call on Apple (AAPL -2.46%) to address this niche segment of the smartphone market, particularly because Samsung and the rest of the Google (GOOGL -1.35%) Android army has been able to tap it quite successfully.

At the same time, investors are expecting the next big wave in computing to come in the form of smaller wearable devices. Should devices get bigger or smaller?

We want bigger phones!
Among others, Topeka Capita Markets analyst Brian White believes that Apple absolutely needs a phablet in order to compete, since that form factor is popular in markets like China.

There's certainly a case for Apple to release such a device, but chances are that Apple won't release a larger iPhone until next year. Besides, there's data that suggests that Apple shouldn't be in any rush, since the 3.5-inch iPhone 4S outsold the 4.8-inch Galaxy S3 in 2012. Flurry Analytics also thinks phablets comprise a relatively modest slice of the broader market.

Oh no! Phones are too big!
One of the reasons why people also expect Apple to release an iWatch at some point is because phones are getting too big and becoming cumbersome to carry around. Microsoft (MSFT -0.37%) is reportedly laying some component groundwork for a possible smart watch.

That's despite the fact that Microsoft used to offer a smart watch, except it failed to gain traction in part because it carried a $10 monthly subscription fee. Microsoft could even be considered a first mover in smart watches.

Google will likely be the first to market with a wearable device when it launches Google Glass later this year. Glass will be a different approach to the market, with the search giant going straight for the jugular.

RBS analyst Wanli Wang was quoted as saying, "We see growing demand for wearable gadgets as the size of the smartphone has become too big to carry around."

So now we have analysts calling for bigger smartphones, which is almost immediately followed by analysts deriding smartphones as being too big. Is there room for both? Or do analysts and consumers need to make up their minds?

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