Can Apple Inc. (AAPL) Afford to Wait On a Larger iPhone?

There are two things that Apple Inc. (NASDAQ:AAPL) needs to do in order to satisfy investors craving continued iPhone growth: launch a mid-range iPhone as well as a larger iPhone. The company has waited much longer to expand the iPhone into a broader product family than it has with other devices like the iPod and iPad, and this expansion is now overdue.

Numerous reports have now speculated that while Apple Inc. (NASDAQ:AAPL) is indeed planning to launch a more affordable model this year, the larger one may not see the light of day until next year. Can Apple Inc. (NASDAQ:AAPL) afford to wait?

Wait for it
Yesterday, Japanese blog Macotakara reported that the mid-range iPhone made out of polycarbonate is still on track for a 2013 launch, and will retail for $330 — the same starting price point as the iPad Mini. The polycarbonate model will likely be thicker to increase durability and save costs.

Following that report, Chinese site EMSOne separately speculated that the more affordable iPhone would launch in August alongside the iPhone 5S that will feature incremental upgrades in line with the tick-tock strategy that Apple Inc.(NASDAQ:AAPL) repurposed from Intel Corporation (NASDAQ:INTC). Only the flagship iPhone 5S is said to include compatibility with China Mobile Ltd. (NYSE:CHL)‘s unique network and the mid-range model will not be supported on the largest wireless carrier in the world. There’s notably no mention of a larger iPhone.

These rumblings corroborate with the 2013 product roadmap that KGI Securities analyst Ming-Chi Kuo laid out in January. The analyst adds that the flagship should see the inclusion of a fingerprint sensor to increase security and leverage Apple Inc. (NASDAQ:AAPL)’s $356 million acquisition of AuthenTec last year. Kuo has a solid track record with accuracy, so his predictions carry more weight than others’.

It just so happens that Jefferies analyst Peter Misek also released a research note in February saying that Apple Inc.(NASDAQ:AAPL) has been running into manufacturing challenges in scaling up its display size from 4-inch to 4.8-inch. This is because Apple recently adopted the relatively new in-cell touch technology in its displays that integrates the touch sensors directly into the LCD panel in order to make the iPhone so thin.

Yields on the larger in-cell panels are proving to be low and Apple has extremely high quality standards. The difficulties are compounded since Apple also has very high volume requirements due to the popularity of its devices. An alternative would be to switch back to on-cell displays or other technologies with better yields. Either way, Misek similarly thinks the larger iPhone is being pushed out to 2014.

Long live the Phablet King
The phablet trend is getting stronger with no signs of abating, at least among OEMs. Not one to be shown up, Samsung’s latest attempt at overcompensation is the Galaxy Note 8.0 that features an 8-inch display.