EGOPOLY

But how would Apple do the bigger screen?

Option 1: Bigger Pixels

The most reasonable, and probably the most likely approach is one suggested by Marco Arment. The idea is that they just make the screen physically bigger, pixels and all. This has zero impact for developers, and the only impact it has for users is to reduce the DPI to about 264 pixels per inch. If I had to bet my own money on these options, this is probably the smart bet, even though it's kind of the most boring option. It's also probably the most cost-effective for Apple, since they would be able to source the screens from the same suppliers and with the same specs that they use for the iPad Retina.

But recently, a number of Android phones have been released that have CRAZY high DPI specs, like over 400 DPI. Now, these are AMOLED displays, which are crappier than the IPS displays that Apple uses.  It's similar to the megapixel battles in the digital camera space: more megapixels do not necessarily mean better pictures: you have to consider effective ISO, color quality etc.. Higher DPI does not necessarily mean a better looking or more usable display: performance in sunlight, color saturation and other factors all have a big impact.

I'm suggesting that Apple will react to these specs, and ship a higher resolution display to "catch up." Rather, I am suggesting that clearly manufacturers are now able to ship insanely high res displays in volume. So Apple has access to more pixels if they want them.

Option 2: @3X

iOS Developers are familiar with the simple compatibility solution Apple introduced when the iPhone 4 introduced the Retina Display. The system automatically scaled up fonts and vector graphics, and would look for double sized images (named @2X by convention). If an @2X image was present in the app, it would be used. If not, the regular image would be scaled up.  The scaled up images look pretty terrible, so developers very quickly shipped updates with new images.

Let's look at how the math works out if Apple said "Hey, @3X everybody!" (and that's pretty much all the documentation they would need to provide. We all know the drill, and would know exactly what to do to make our apps @3X ready.)

Supposed the target display size is 5" ; that means the narrow side of the display would be 2.45" and it would be 960 pixels (3 X 320), which yields a screen resolution of 392 DPI. The current iPhone Retina Display is 325 DPI, so that's a 20% increase in density. I have no idea if that's feasible for manufacturing in IPS displays, but it's a lot less than the currently shipping AMOLED displays. 

The biggest downside of this is that it would make apps a lot fatter: you'd have to ship all your icons and graphics in 1X, 2X and 3X. And note that a 3X images is 9 times bigger to store than the base image. Math.

Option 3: 1080p

The new super huge android phones seem to all be going 1080p. This seems like ridiculous overkill to me, since even at iPhone Retina resolution the pixels are too small to see. (Though my kids swear that they can see the pixels; so possibly I am just old.)

But Apple could say "screw it, we're going right to 1080 pixels on the short side of the screen." The immediate question is how this would work for developers? It's not an integer multiple of the original 320 pixel display. You can't just make @3X images; and anything that scales up is not going to be a nice clean pixel boundary: hello Moiré patterns!

But look at what Apple has done with the new Retina Macbooks: you can run those at all kinds of non-integer-multiple resolutions, and things look fine.  At a certain point, it seems, pixels can be small enough that you can do arbitrary scaling. 

In this scenario, developers can do nothing, in which case iOS will scale them to 1080p; since the aspect ratio is still the same 16:9 as the iPhone 5, no layout changes are needed. And if developers so wish, they can create @PX images, which are images laid out to be 3.375X bigger than their base counterparts. A 44x44 point icon would be 148.5 x 148.5 pixels, which is impossible of course, so it would have to be 148x148 or 149x149.  I guess you would always have to round up to avoid weird 1 pixel-thick gaps appearing between elements in some situations. But the pixels are so frigging small at this point (441 dpi) I think it would work.

So what would I put my money on?

I guess I would choose the boring answer as being the most likely. It certainly seems like the least impactful to development of iOS graphics software and iPhone graphics hardware; uses no additional memory; doesn't make app developers do more work and make fatter apps. And battery life would be the least impacted by this option.

But it can't sit too well with Apple that these new big phones are beating them on displays, at least on the specs of displays. It may well be that the Retina display creates a better experience. At a point, it becomes a Power PC situation. They can parrot all they want that the clock speed isn't what's important, and all the time everybody knows that an Intel processor would be much faster in almost every practical way. 

You can almost hear Steve Jobs saying it: "So you want a big phone, a phone too big to use with one hand? You want 1080p, even though it's physiologically impossible to see the difference from 720p? Fine, here you go dumbass: 441 DPI full 1080p 5" display."

I just hope they don't stop making the regular sized iPhone if they do it.