Sept. 7, 2014 7:18 p.m. ET
It's time for Apple Inc. AAPL -0.62% Apple Inc. U.S.: Nasdaq $98.36 -0.61 -0.62% Sept. 8, 2014 4:00 pm Volume (Delayed 15m) : 45.76M AFTER HOURS $98.45 +0.09 +0.09% Sept. 8, 2014 7:59 pm Volume (Delayed 15m) : 598,369 P/E Ratio 15.78 Market Cap $592.62 Billion Dividend Yield 1.91% Rev. per Employee $2,214,380 09/08/14 Book Review: 'The Virgin Way' ... 09/08/14 For Apple CEO, Launch Is Bigge... 09/08/14 Amazon Loves Government More quote details and news » to go big.
After rival smartphone makers snatched away customers by offering bigger displays, Apple is joining the fray with its own larger-screen iPhone. Apple on Tuesday is expected to take the wraps off iPhone models with 4.7- and 5.5-inch screens—up from the 4-inch display of the current iPhone.
For years, Apple stuck with a smaller display even as rivals expanded screen sizes and customers—who are spending more time playing games and surfing the Internet on their phones—clamored for the feature. Phones with screens larger than 5 inches accounted for nearly 40% of global smartphone shipments in the second quarter, up from 21% a year earlier, according to market researcher Canalys.
Apple is the king of high-price smartphones. But consumers are starting to expect that an expensive smartphone should come with a big screen. In May, 98% of all smartphones selling for more than $400 and using Google Inc. GOOGL +0.64% Google Inc. Cl A U.S.: Nasdaq $601.63 +3.85 +0.64% Sept. 8, 2014 4:00 pm Volume (Delayed 15m) : 1.58M AFTER HOURS $600.25 -1.38 -0.23% Sept. 8, 2014 7:47 pm Volume (Delayed 15m) : 18,347 P/E Ratio 30.56 Market Cap $400.38 Billion Dividend Yield N/A Rev. per Employee $1,321,030 09/08/14 Ford Exec Sees Dangers of Addi... 09/08/14 EU Asks More of Google 09/08/14 The Race For a Self-Driving Ca... More quote details and news » 's Android operating system had a screen larger than 5 inches.
The largest manufacturer of Android smartphones, Samsung Electronics Co. 005930.SE -0.74% Samsung Electronics Co. Ltd. S. Korea: KRX KRW1,201,000 -9,000 -0.74% Sept. 5, 2014 3:00 pm Volume (Delayed 20m) : 215,408 P/E Ratio 6.26 Market Cap KRW198,917.94 Billion Dividend Yield 0.08% Rev. per Employee N/A 09/08/14 Barnes & Noble's Valuable Lega... 09/08/14 Amazon Slashes Fire Phone Pric... 09/08/14 GE Deal Won't Soak Whirlpool--... More quote details and news » , in 2011 aggressively promoted larger displays, starting with the 5.3-inch Galaxy Note, which was considered mammoth at the time. The South Korean company progressively increased the screen size for its flagship Galaxy S series.
For smartphones with screens of 5 inches or larger, Samsung is the leader, with 34% of the market, according to Canalys. Samsung is followed by Chinese manufacturers Lenovo Group Ltd. 0992.HK +2.44% Lenovo Group Ltd. Hong Kong $12.62 +0.30 +2.44% Sept. 8, 2014 4:01 pm Volume (Delayed 15m) : 34.62M P/E Ratio 19.70 Market Cap $128.22 Billion Dividend Yield 2.85% Rev. per Employee $5,789,730 09/07/14 Bigger iPhone Is Overdue for A... 09/05/14 Intel spurs market for 2-in-1 ... 09/01/14 Reboot Risks and Rewards for P... More quote details and news » , with 8.5%, and Huawei Technologies Co., with 8.1%.
The larger screens are "the big advantage that Samsung has had over Apple," said Gartner analyst Van Baker. "It levels the playing field to a certain extent."
Larger displays are especially crucial for the iPhone in China and other emerging Asian markets. Bigger-screen smartphones are especially popular in such markets as the device replaces the personal computer as the primary computing device.
By moving to a bigger screen, Apple can more easily differentiate this year's new models from previous iPhones. When the company introduced the iPhone 5S last year, Apple incorporated a new fingerprint sensor and better camera capabilities, but such improvements aren't as obvious or easy to promote as a larger screen.
Morgan Stanley analyst Katy Huberty said she expected Apple's larger-screen phones to drive a "meaningful upgrade cycle." She forecast that Apple could gain as much as 11 percentage points of market share with the new iPhones. Apple currently has 42% of the U.S. smartphone market, according to comScore.
The bigger screens might provide a boost to the iPhone business but could add pressure to Apple's slumping iPad. At 5.5-inches, the bigger iPhone will start to encroach on the iPad Mini, the 7.9-inch version of Apple's tablet offerings.
Trading in an iPad Mini customer for an iPhone customer might not be a bad thing for Apple, however. The current, high-end iPhone, the 5S, starts at $649 and analysts expect the price to be $100 higher for the coming 5.5-inch model. The iPad Mini with a cellular connection starts at $529.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
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