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January 23, 2014

Apple: Larger iDisplays and Say Goodbye to Plastic-backed iPhones

A new report from the Wall Street Journal's Hong Kong bureau is making no bones about Apple's future iPhones. The report comes across as definitively stating that Apple is gearing up to deliver two new iPhones in the second half of 2014, one with a 4.5 - 4.8 inch display and one with a greater than 5 inch display. There isn't anything new here, aside from the level of certainty implied by the WSJ report.

It is interesting to note that Apple gearing up to deliver larger display iPhones also happens to parallel its new deal with China Mobile. For those who may not recall, about six months ago we noted that Apple has avoided the China Mobile market in past years primarily because of issues with LTE standards. Over the last 18 months China has opened up its LTE to a wide swath of the country, and at the same time Apple began to use radios within its current iPhones (the 5, 5c and 5s) that are able to access China's LTE services - something it could not do before making the switch in radios.

Apple carefully avoided the need to build different iPhones sporting different China-specific radios simply by staying out of the market. Being able to tap into the China Mobile market with the same iPhone it sells worldwide was the key reason the deal with China Mobile was finally signed. Both Apple and China Mobile are now truly ready for each other in very synergistic ways.

We've long believed that Apple was holding off on larger screen iPhones because of the delay in tackling the China Mobile market. Now that the market is open Apple has in hand a ready market - and a very large one to boot - for larger iPhones. It is no secret that as much as the larger screen smartphone is desired by people on a global basis, the Asian market is, we believe, the market that truly exhibits a passion for them.

With China Mobile opening the doors for Apple, 2014 is the ideal time for Apple to finally introduce larger display iPhones. But does anyone even remotely suspect that Apple won't also see a major new market globally? Our sense of it is that we will see a significant swing to Apple from Samsung, LG and HTC on premium large display smartphones. We surely like this overall positioning.

WSJ's sources also claims that the new iPhones will not try to imitate the anticipated curved screen display that we all now expect Samsung to deliver on with its next generation Galaxy. That makes sense - if and when Apple does deliver on curved screens it will be with an entirely new design aesthetic that will likely be related to its eventual wearable tech devices.

No More Plastic!

And finally, it now appears to be the case that Apple is very likely to ditch using the iPhone 5c polycarbonate cases. To this we say Yes! We do acknowledge that we know quite a few people who really like the 5c cases and their color palette, but we are not fans.

The Wall Street Journal's sources are also adamant that the new devices will continue Apple's metal-backed approach. We certainly hope so! Both new models are expected to feature metal casings similar to what is used on the current iPhone 5s. There is no denying that the metal back gives the iPhone a far more premium look and feel.

As the displays get larger the other possibility is that Apple may be able to further reduce the thickness of each device. While a bump up from 4 to 4.5 or 4.8 inch displays won't provide much additional room to flatten things out further, a 5+ inch display certainly will allow Apple to play with going thinner. We'll see.

Apple's possible plan to scrap the plastic for either of its new models is based on supply chain reports Apple continues to scale back on 5c orders. It is still too early to say whether the 5c will ever prove a success. We don't expect great sales numbers for it when Apple reports earnings next Monday. We've always thought the 5c would eventually get a significant price cut - albeit one that still allows Apple to make money on them while recouping lower end market share. That is our positioning belief - we'll see how things shake out as we move into the second half of 2014, but we're sure this is the direction the 5c will take.

As always, take everything we've written here with many grains of salt. Over the last two years the sort of leaks we're reporting on here have proven to be quite accurate…but that doesn't mean Apple may not be trying to take advantage of this to "game" the leak game.

And last but not least, look for the stock to possibly go through a positive pop over the next few days. We all know Carl Icahn is buying, but large display iPhones rumors are likely to drive that pop.

It will be a fun iPhone ride in 2014.

Edited by Cassandra Tucker

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