Apple needs larger iPhone to counter the rise of the 'phablet'
Canalys says Samsung, HTC making inroads
Handset size, the firm claims, is fast becoming the dominant issue, with the body urging Apple to deliver a larger iPhone with its next hardware release.
"Despite its slowing growth, Apple still shipped over 37 million iPhones," said Canalys principle analyst Pete Cunningham.
"But HTC and Samsung have raised the bar with their latest handsets and Apple needs to respond with its next iPhone.
"The iPhone user interface is now six years old and badly in need of a refresh. Hardware-wise, the biggest dilemma that Apple faces is what it does with the size of the display on the next iPhone."
Change of direction
Canalys' numbers suggest Android handsets now account for more than 75 percent of smartphone shipments, with Samsung boosting its market share to over 32 percent.
In comparison, growth of Apple shipments is slowing annually, up just 6.7 percent - the lowest level since the launch of the original iPhone back in 2007.
Cunningham believes that, as a result, Apple will be moved to alter its approach with the next iPhone, if only to defend its existing userbase.
"It cannot afford to ignore the trend for larger displays in premium smart phones," he condluded.
"We expect an increase on the iPhone 5s 4" display but are not anticipating a 'phablet' style iPhone."