Apple (AAPL 0.07%) will release a larger iPhone next May, according to a report from DigiTimes. The Taiwan-based publication has a long record of correctly forecasting Apple's upcoming products, including the iPad Mini.
If Apple releases a larger iPhone in May, that would be only eight months after releasing the iPhone 5s, a far shorter period than usual. On this basis, some have rejected the report as nonsensical -- but it makes perfect sense if Apple plans to adopt a product strategy developed by Samsung (NASDAQOTH: SSNLF) and utilized by many of Google's (GOOGL 10.31%) hardware partners.
Samsung's dual flagship strategy
Unlike Apple, Samsung has two flagship phone lines: the Galaxy S and the Galaxy Note. Typically, Samsung releases the latest Galaxy S in the first half of the year and the newest Galaxy Note in the second half.
This is beneficial to Samsung in the sense that there's never more than a six-month period without a new Samsung handset entering the market. Although they are not dramatically different, Samsung typically makes slight improvements from one phone to the next -- the Galaxy S4, for example, features a Snapdragon 600 processor, while the Galaxy Note III has a Snapdragon 800.
The growing importance of phablets
Samsung's phones also serve different markets. The Galaxy Note III's 5.7-inch screen is simply too large for some people; although Samsung says it is selling well, demand for the phone remains limited relative to Samsung's Galaxy S4.
Other OEMs that use Google's Android have adopted the same strategy. HTC, for example, has the One (its standard flagship) and the One Max (the oversized version of its flagship handset). Sony has the Xperia Z1 and the Xperia Z Ultra. LG has the G2 and the upcoming G Flex.
By not selling a phablet, Apple is essentially a ceding an entire market segment to Google's Android, similar in the way in which it ceded the smaller tablet market prior to the release of the iPad Mini. This will become increasingly important in coming quarters, as the demand for phablets is projected to continue increasing -- Technalysis Research predicts that next year, phablets will outsell tablets worldwide, a projection that's already come to fruition in many parts of Asia.
The iPhone phablet in 2014?
Bloomberg reported in November that Apple was working on two new, larger iPhones: one with a 4.7-inch screen and one with a 5.5-inch screen. This second handset would fit squarely in the realm of the phablet, about on par with Samsung's Galaxy Note.
If Apple splits its product line -- releasing the phablet in the first half of the year and the flagship iPhone in the second half -- it would mirror Samsung's phone strategy, allowing Apple to nearly always have a new handset on the market. If that's the case, Apple shareholders should take it as a positive. It's possible that Apple's unwillingness to release a phablet has cost it sales -- a few Apple devotees may have made the switch to Google's Android for larger phones. An iPhone phablet would allow Apple to recapture these customers, while a two-flagship model would allow Apple to release more phones more often.
Apple's management has promised new products in 2014. If DigiTimes is right, expect one of those products to be a phablet. Watches and TVs aside, an iPhone phablet could be Apple's most important product next year.
