There's been rampant speculation, rumor mongering, and punditing that Apple must be, has to, is, or really should be making an even larger iPhone. Recall that from the original iPhone launch in 2007 up to the iPhone 4S of 2011, the screen size was a steady and unchanging 3.5-inches. Then with the iPhone 5 in September of 2012, Apple jumped to 4 inches while much of the rest of the smartphone industry was powering on to 5 inches and beyond. Heck, just two weeks ago Samsung announced a pair of new Android-powered smartphones with 5.8-inch and 6.3-inch screens.
Asked during today's Q2 2013 fiscal results conference call as to whether or not Apple's and CEO Tim Cook's disinclination towards larger screens has changed, Cook said that there are a number of trade-offs that have come with larger screens. He said that Apple's own research has revealed while some customers obviously place value on larger screen sizes (those giant Samsung, LG, and HTC phones wouldn't be selling otherwise), others value resolution, color quality, brightness, portability, and app compatibility. He said that "our competitors have made significant trade-offs in many of these areas" and that Apple would not launch a larger-screen iPhone while these trade-offs exist.
It's worth taking into consideration that Apple said similar things running up to the launch of the iPhone 5 and it's bigger screen, and Cook said as recently as the last quarter that he's happy with the 4-inch screen. It's also worth nothing that while Cook says he believes the iPhone 5 has "the absolute best display in the industry", the advent of 1080p smartphone screens has obviated some of his stated advantages such as resolution.
The "while these trade-offs exist" line implies that Apple does indeed have a larger-screen iPhone in development. It'd be silly to think that there aren't several 4.5-inch or 5-inch iPhones floating around the mad labs of Jony Ive. There are obviously trade-offs that would have to be overcome should Apple opt to jump up to a larger screen size, notably on the marks of portability and app compatibility. During the iPhone launch event in 2007, Steve Jobs pulled the iPhone out of his pocket like it hadn't even been there the entire lead-up to its unveiling. A +4-inch iPhone compromises that portability, especially when you still have to cram in a battery to power that display.
More pressing is the app compatibility issue. After several months since the iPhone 5 was released, we're still seeing new and updated apps that don't support the increased height of the new phone. The 4-inch screen didn't change the pixel density or horizontal width, while a 5-inch iPhone would almost certainly have to do just that. That creates a massive app compatibility headache, which Rene went to absurd lengths to analyze back in January.
Is there a five-inch iPhone sitting on a lab bench somewhere in Cupertino? Without a doubt, yes. Is it ready for release? We wouldn't say it is. Those trade-offs still exist, and it's going to take even Apple time to overcome them.