The WSJ reports,
The new screens measure at least 4 inches diagonally, the people said, compared with 3.5 inches on Apple’s latest model, the iPhone 4S. Production is set to begin next month, the people said. Analysts have predicted that the next iPhone will come out in the fall.
Remains to be seen how Apple will handle the increased size, will they change the aspect ratio forcing the developers to update all their apps or will they go the way predicted by “Timothy Collins”, the Vergecast caller? Developers already have a hard time coping with Android & its various screen resolutions, Apple wouldn’t repeat the same mistake!
EDIT: They did manage a 2048*1536 on a 10″ screen for the iPad 3. What’s stopping them from pushing the iPhone resolution to 1920*1080 on a 4″ screen? They still maintain retina quality, the A5X chip should definitely be able push the pixels, the aspect ratio would definitely need to be handled though!