Following persistent rumours of plans for a smaller, cheaper Apple iPhone nano, the latest Apple rumour this week is that the Cupertino-based tech giant is planning to release an iPhone 5 with a larger, 4-inch screen.

Details of Apple's next gen model reportedly leaked from component suppliers via Digitimes suggesting that Apple will release a larger-screened iPhone in order to compete with the growing threat from Android in the 4-to-7-inch smartphone market, such as Samsung's' Galaxy S and Google's Nexus S.

We need a bigger screen

That's according to component suppliers, who told DigiTimes that the production lines for Apple's next gen iPhone have begun testing.

"The component suppliers noted that the production lines for Apple's next generation iPhone have begun testing, and Apple is interesting (sic) in expanding the screen size to 4-inches to support the tablet PC market as the vendor only has a 9.7-inch iPad in the market," notes Digitimes anonymous source.

"What is worth noticing is that Dell has re-defined the market position of the Dell Streak 5 – which was originally focused on the tablet PC market – as a super phone. The Dell Streak 5 uses a 5-inch panel which stands in the gray area between tablet PC and handset segments and indicates there is an overlap in the market for 4- to 7-inch panels.

iPhone 4 currently features a 3.5-inch widescreen touch-controlled 'Retina' display, with Apple reportedly looking to increase the size of the screen by 0.5 inches to compete with the numerous other 4-inch touchscreen phones on the market.

Via Digitimes