Are Apple’s Larger iPhone Plans in Peril?

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A larger-screen iPhone is not coming to the market anytime soon, according to Jefferies analyst Peter Misek, who believes technical challenges have put Apple’s (NASDAQ:AAPL) plans for the device on hold. Misek, who has a Hold rating on the company’s stock and a $500 price target, also believes that demand for the iPhone 5 has begun falling, with Apple cutting production once again this quarter.

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The analyst writes in a research note on Wednesday that a 4.8-inch “iPhone 6″ might not arrive before June 2014 because of screen yield issues. “Apple tried to accelerate the launch, but scaling the in-cell screens from 4 inches to 4.8 inches created substantial yield issues,” Misek writes. ”The earliest Apple could have launched a 4.8-inch phone would have been this fall … We think in-cell is having difficulty ramping to 4.8-inch, which is making Apple look at switching to on-cell and OLED or IGZO.”

According to the analyst, such a device could also pressure margins for Apple with its more expensive components and display. ”Apple has been able to add functionality by using NAND price declines to subsidize other costs,” he writes. “We expect the iPhone 6 to have a pricier app processor and display combined with limited NAND price declines, which will lead to a 200bp+ headwind for the iPhone gross margin.”

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