While on the surface this is a good thing, screen size is only one of many different design decisions that make a good smartphone. The iPhone may not be the biggest handset on the market, but that's because Apple has focused on making sure it feels good: It fits into hands large and small; it can easily be used with one hand; it looks natural when you're holding it to your ear; and it slides in and out of any pocket without effort. For contrast, on a recent trip to Best Buy, a friend took a picture of yours truly holding Samsung's Galaxy Note, which bore a certain resemblance to a scene from the classic Top Secret!
The developer factor
It's true that some websites don't render well on the iPhone's screen. However, the reason is not the small screen size but, rather, the fact that the site's code is not optimized for smartphones. When developers know what they're doing, mobile webpages are often easier to use on the go than their desktop-bound counterparts, with important information readily available when you need it in a hurry.
Speaking of developers, different screen sizes and resolutions would be unlikely to meet with approval from the people whose apps populate the iOS ecosystem. One of the many joys of writing software for Apple's mobile operating system is that there are only three resolutions to work with; this makes pixel-perfect designs easier to achieve and allows great apps to be built in record time.
A larger phone that sports a higher resolution would throw a monkey wrench into this process; unlike the transition from 3.5-inch to 4-inch handsets, which was made easier by the fact that the width of the screen remained the same, an all-around bigger screen would mean either coming up with completely different designs or giving up on pixel perfection altogether—neither of which sounds like the kind of scenario that Apple would want to foist upon its developer community.
Asking the right question
Ultimately, it seems to me that screen size is a bit of a red herring. It's an easy differentiator for manufacturers—certainly easier than coming up with actual innovations—and one that analysts can latch onto when they try to explain away Apple's continued success in the face of relentless competition and falling prices.
The real trick is coming up with the right screen size, and that's something that Apple has, so far, managed to do very well. I have no idea whether the company plans to change the size of its screens, and I'm sure that, somewhere in Jony Ive's labs, prototypes of all shapes and dimensions are being manufactured and tested continuously. If a bigger iPhone is going to eventually hit the market, however, I hope that the question Apple chooses to answer is not whether it needed more pixels, but why.
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