Sources in China seem to think that Apple will release a bigger iPhone that will have a 4.8 inch screen. I don’t know if these rumors are true, but they have a higher degree of probability since there’s a logical reason for Apple to go for a 4.8 inch screen size. So it’s either someone pushing bullshit rumors that accidentally got it right in terms of size, or there’s indeed some truth from these rumors.
I personally think that Apple could do a larger iPhone, if they think that they need to — their previous hardware decisions indicate that they are well aware when they need to release a significantly different (from a hardware point of view) device to capture the market: Apple didn’t stay with only the original iPod “classic” form-factor — they made the mini, nano and the shuffle, nor did Apple stay with the original 9.7 inch iPad — they released the iPad mini. Considering this, why should the iPhone be any different?
Historically, Apple wasn’t trying to jump in first into the market with their product, but trying to do it better than everyone else: there were mp3 players prior to iPod, there were smartphones prior to iPhone, there were tablets prior to iPad, yet most of the time all of those products sucked balls, so Apple went and made better products, which made them successful.
By trying to differentiate themselves from the iPhone and get a leg up on iPhones on the store shelves (since some people seem to think that “bigger is better”), companies like Samsung, LG and HTC made bigger smartphones and proved that there’s a viable market segment for those devices, so now Apple can make a product for that market.
They can even pitch their “big smartphone” as better and more usable than those from their competitors, e.g. by minimizing bezels around the screen, using their palm rejection tech in iOS (which they used for the iPad mini) to avoid unwanted touches that would come form using small bezels.