Should Apple build an iPhablet?

Posted by Trent Nouveau

A number of analysts have been loudly clamoring for Apple to design a slick phablet in the form of a larger iPhone with a 5-inch display.

Shaw Wu of Sterne Agee, for example, says big-screen Android phones have been a greater success than originally anticipated. Indeed, the long-anticipated Samsung Galaxy S4, which boasts a 5-inch touchscreen, is due this April.

"We believe [Cupertino] is leaving money on the table by not participating in larger touchscreen form factors," Wu wrote in a recent investors note.

"But more importantly, we believe Apple needs to reclaim high-end leadership as that is what brand is about. Sure, iOS, iTunes and the App Store are great, but it is clear that many customers want larger screens."

According to Wu, it is time for Apple to think differently and change its strategy to regain its mojo.

"Based on feedback, we believe the company needs to: reclaim high-end leadership as iPhone 5 isn’t viewed as high-end anymore and get more aggressive in the midrange," he opined.

"The good news is that we are seeing evidence of progress for both in our supplier checks."

Meanwhile, Barclays Capital‘s Ben Reitzes noted that he was "longing for an iPhablet" as the larger-screen form-factor will ultimately dominate smartphone shipment growth, rising 105% between last year and 2015, from 27 million units to 230 million.

As such, the one-handed use of the iPhone 5 is less important since phone calls are becoming less important than navigation, texting, videos, books and Web access for many.

Plus, says Reitzes, the larger screen seems to be more popular outside of the US and the phablet has significant momentum in China.

However, the analyst emphasized the most important advances for the iPhone in 2013 will be actually be improvements to iOS and its services, which can help effectively expand the market for Apple.

"We believe Apple can turn perceptions around with a real move into payments, an integrated iOS-led television service and improvements to iCloud (including subscription-based services)," he added.