Please ensure Javascript is enabled for purposes of website accessibility

Why Apple Is Waiting for a Bigger iPhone

By Evan Niu, CFA - Apr 24, 2013 at 9:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Apple keeps sitting on the sidelines as the phablet niche continues to grow. When with the iPhone maker jump in to address that market segment? Only when it can overcome performance trade-offs.

The chorus of analysts and investors calling for Apple (AAPL 4.08%) to launch a larger iPhone continues to get louder. There's no doubt that a segment of the smartphone market prefers larger phones, and everyone keeps wondering when Apple will step up to meet that need.

Barclays analyst Ben Reitzes took the opportunity to ask again, since he asked the same question on the January call. He asked Tim Cook if his view of the 5-inch phone market had changed at all in the past three months, or if Cook felt that the 4-inch display is still sufficient.

According to Cook, it's all about trade-offs:

My view continues to be that iPhone 5 has the absolute best display in the industry. And we always strive to create the very best display for our customers. And some customers value large screen size, others value also other factors such as resolution, color quality, white balance, brightness, reflectivity, screen longevity, power consumption, portability, compatibility with apps and many things.

Our competitors had made some significant trade-offs in many of these areas in order to ship a larger display. We would not ship a larger display iPhone while these trade-offs exist.

The CEO clearly feels like jumping the gun with a bigger iPhone display would translate into sacrifices in other important areas that affect overall display quality.

Cook also noted certain weaknesses such as color saturation and brightness with OLED displays back in February at a Goldman Sachs conference, which sent shares of Universal Display (OLED 4.11%) reeling briefly before the OLED specialist recovered. That was likely a knock directed more in Samsung's direction, since the South Korean company is the biggest proponent of OLED displays in mobile devices, but Samsung is also Universal Display's biggest customer. Universal Display simply got caught in the crossfire.

But he didn't say "no"
Cook didn't say "no" to a larger iPhone. Instead, he implied Apple would only launch a larger iPhone to address the growing phablet niche after it can properly address the lengthy laundry list of trade-offs.

Fortunately, the continued strength of the iPhone 4, a nearly 3-year-old smartphone with a 3.5-inch display, shows Apple can afford to wait.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$149.64 (4.08%) $5.86
Universal Display Corporation Stock Quote
Universal Display Corporation
$128.84 (4.11%) $5.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.