.Last week iTWire reported on the global phablet phenomenon, in a report by consultancy Accenture. Now new local research supports the demand for larger screens.

Australian analyst firm Telsyte’s Australian Smartphone Market Study 2014-2018 shows there were 16 million smartphone users in Australia at the end of June 2014, an increase of 1.1 million over the previous six months.

Both the Android and Apple platforms grew in the first half of this year, and together make up 93% of the installed base of users.

While the Australian smartphone market is maturing, some 20% of mobile phone users are still on regular (so-called ‘feature’) mobile phones. Telsyte expects strong sales in the second half of 2014, driven by new devices and a shortening of average replacement cycle times.

Telsyte estimates that 5.6 million new smartphones will be sold in Australia during the second half of 2014. The majority of sales will be to existing smartphone users, but Telsyte estimates around 1.5 million new users will take up smartphones by the end of the year.

Telsyte managing director Foad Fadaghi says the Australian smartphone market is dynamic and still up for grabs. “Roughly a third of those intending to buy a new smartphone in the second half of 2014 have not decided on the platform they intend to purchase, and around a third intend to switch platforms,” Fadaghi says.

Apple retains the highest repeat purchase intentions (70%) while Android has improved to over 60%, closing the gap. Telsyte found Windows Phone 8 uptake remained steady as the lack of handset and brand options affected faster adoption.

Phablets – smartphones that Telsyte defines as having a screen size of 5.5 to 6.9 inches – are still a niche market, despite more manufacturers releasing larger-screen devices that blur the line between a smartphone and tablet. Telsyte believes the phablet market hinges on the entrance of Apple, which is expected to launch a 5.5 inch iPhone 6 later this year.

Telsyte believes a larger screen iPhone will be a strong strategy if Apple decides to release such a device later this year, and could help it reclaim some lost market share in Australia. “Some 40% of survey respondents that intend to purchase an iPhone 6 indicated they would consider it only if it has a larger screen,” Fadaghi says.

Telsyte research shows that one in five existing Android users that intend to purchase a new smartphone and are not planning to purchase an iPhone, indicated they would “change their smartphone purchasing decision” if a larger screen iPhone 6 became available.

But it’s not all one way traffic. Telsyte also found that around 10% of those expecting to purchase an Android smartphone are currently using an iPhone.

Furthermore, Telsyte research shows that Android smartphones have now overtaken iPhones as the main devices purchased on contract from carriers, following strong carrier promotions and the reduction in iPhone subsidies.

The research also found that smart watch adoption is still embryonic in Australia, and 80% of smart watch users pair their devices with Android smartphones. Samsung is the market leader, although the product category might be accelerated with the arrival of an Apple iWatch in 2014.

Telsyte research shows that smart fitness bands are more popular than smartwatches. This is due to their lower price points and popularity as a gift. Fitbit is the market leader, with only a third of fitness band users currently pairing them with iPhones.

More than 1 million smart watches and fitness bands (combined) have been sold in Australia, according to Telsyte.