Apple would not comment on the report, which cites "people familiar with the situation."
The iPhone has one of the smallest screens in the smartphone market at 3.5 inches. Most of the devices rivaling Apple's smartphone use touchscreens that measure at least 4 inches, including Samsung's recently announced Galaxy S III and the HTC One X.
A potential downside could be how this reportedly larger screen impacts the overall size of the iPhone. That smaller size also makes it much easier to carry in your pocket, for example.