Apple to offer 5.5-inch iPhone 6: Will it steal iPad mini sales?

One third-party case maker says it has the specifications for the larger 5.5-inch iPhone, a phablet-sized device. Will it cannibalize iPad mini sales?
Written by Zack Whittaker, Contributor
A 5.5-inch iPhone 6 could cannibalize the iPad mini — but will Apple care?
Image: CNET/CBS Interactive

At the time of Apple's iPhone 6 launch on Tuesday, other companies are gearing up to show off their wares.

One credible source said the Cupertino, Calif.-based technology giant has given it, and likely a small number of third-party manufacturers design and dimension specifications under confidential non-disclosure agreements, in order to gear up their products for the launch day.

One manufacturer, whose name we are not publishing as the information is confidential, was given design specifications for a 4.7-inch iPhone, and a larger 5.5-inch iPhone — the latter of which has been reported on by other credible news sites, like The New York Times, but has been shielded from the various leaks plugged by many Apple blogs and rumor sites.

Although Apple allows third-parties to create accessories for its devices under the MFi ("Made for iPhone/iPad") Program, it's understood that the company has never issued specifications ahead of a device launch, likely for fear of leaks.

We reached out to Apple for comment, but did not hear back at the time of writing.

When the iPhone 4 was released, the late Steve Jobs spoke of the "Antennagate" incident, in which the iPhone 4 cellular antenna did not produce the expected service signal when held a particular way. Jobs said in a media question-and-answer session that it was a business decision to guarantee continued profits in its accessory line-up.

He added that Apple will not tell third-party makers until its products are "just about ready," but did not hint if that was before any device unveiling, such as one scheduled for Tuesday.

With a 5.5-inch iPhone said to be on deck for Tuesday's event, the iPad mini is looking less relevant than ever before.

Daring Fireball's John Gruber said in August he believed there was "too much smoke... for there not to be a fire" around the 5.5-inch iPhone narrative. Gruber even suggested the screen resolution could land in at three-times the Retina display quality, at 2,208 x 1,242 resolution, or 461 pixels-per-inch (ppi).

That though may be a little too big for the average consumer — let alone their pockets. But it's what the consumers have been crying out for over the past year, as Samsung has forged its own phablet-paved path ahead of the iPhone maker.

BMO Capital Markets analyst Keith Bachman hit the nail on the head, saying:

"We think Apple's large-screen iPhone 6 will likely cannibalize the iPad mini, and we believe this will be positive for margins."

The iPad mini remains a low-margin device — which isn't a surprise considering the iPad division is a fraction of the iPhone's division, which makes up more than 53 percent of the company's overall quarterly revenue. It's a drop in the bucket.

Former chief financial officer Peter Oppenheimer said the quarter after the iPad mini's unveiling that the device's margin is "way below the company average." He added that the figure has "substantially lowered product margins than Apple's margins as a whole." 

Apple chief executive Tim Cook said though the company would aim to reduce manufacturing costs to cut down on revenue loss, that Apple was "confident" in its decisions.

The iPad mini may have been a design feat, but has dogged the company. Will a 5.5-inch iPhone relegate the iPad mini to a blip in the iPad's history?

The iPhone gravy train practically derailed at the end of the company's fiscal third-quarter. If anything's going to get the company's margins up and profits through the roof again, Apple needs a bit more iPhone and a little less iPad. 

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