Updated: According to BGR, this is a fake photoshop job.
In addition to the circulating iPad 2 rumors, speculation on the Internet has it that Apple has bigger plans for the iPhone 5 refresh, which is believed to be announced at the WWDC developer conference this June. According to 9to5 Mac, Apple may be preparing its next-generation iPhone to have a larger display in an attempt to better compete with the Android smartphones sporting displays of 4-inch or greater.
In fact, at the Consumer Electronics Show earlier this year, most of the Android smartphones announced by big names, like Motorola, HTC, Samsung, and LG came with 4.3-inch displays. The closer competitor to the iPhone 4 would be the Motorola Atrix 4G, an Android smartphone on AT&T which boasts a 16:9 widescreen aspect ratio and qHD resolution, which closesly matches the pixel count on the Retina Display of the iPhone 4, but is a bit narrower on the width spec due to the narrower widescreen format when held in portrait mode. However, pixel density on the Atrix is slightly less than the iPhone 4 as the pixels are distributed on a larger 4.3-inch surface compared to the 3.5-inch display of the Apple smartphone.
Leaked parts for the display obtained by 9to5 Mac suggests that the new larger 4-inch iphone would have a thinner bezel, which would give the illusion of an edge-to-edge display, at least on the two sides of the device when held in portrait orientation. The iPhone 5, or whatever it will be called upon launch, may also support an integrated SIM design, which would occupy less room on the design. With this design, the GSM iphone would be similar to the CDMA iPhone as there would be no user serviceable parts as the SIM tray would be gone. Instead, the SIM would be completely internal and Apple could configure the SIM to specific operators at the point of sales or activations. Coupled that with a world phone design that would support GSM/HSPA networks as well as CDMA/EV-DO networks for 3G connectivity, Apple could easily program the phone at activation to either be locked to AT&T or Verizon depending on the carrier choice, plans, and customer wishes. This means that when created, there will only one version of the iPhone with support for both networks and worldwide roaming capabilities; the CDMA and GSM version will finally get merged into a single design. If true, a 4G-capable iPhone may not be available yet, unless Apple implements the HSPA+ evolved 3G protocol on the AT&T side, which supports a faster 3G form of mobile broadband data that AT&T is promoting as 4G. However, an LTE smartphone, as a 4G iPhone, would not be available with the iPhone 5 if the mentioned rumors prove true.
Despite having a larger screen, the new iPhone may still offer the same pixel count and would maintain its Retina Display status. It may come with an upgraded CPU–rumored to be called the A5 chip–that may debut alongside the iPad. Along with the updated CPU, there may be additional RAM for better multitasking and memory management when running multiple apps, along with improved graphics capabilities. At this time, 9to5 Mac is saying that the next-generation iPhone may cost less than the $200 entry-level price with a two-year contract.