Here we go again with the 4 inch display iPhone rumors for the next generation of the iPhone. Macotara states:

According to Asian source, Hitachi Displays, Ltd. and Sony Mobile Display Corporation started to ship 4-inch LCD for new iOS device and LCD for iPad 3. These 2 companies will be merged their business with Toshiba Mobile Display Co., Ltd., as “Japan Display” in 2012 spring.

However the 4 inch display might not be such a bad idea for the next iPhone. Apple would be able to keep the same 940×640 resolution they do now to keep developers happy and to avoid fragmentation. However some people would probably say that the display would not be retina which is not true. However there is a problem with apps that are old and do not support the retina resolution of the current iPhone 4(s). Would we see boxes around the display like with the iPad using iPhone apps or would some magic happen and the phone would just make the pixels larger to fit the screen?

[Picture VIA MacRumors]