Apple may be dealing with underlying architecture issues in iOS that weren't foreseen early on. I speculate they either can't, or don't want to, have scaling within iOS, perhaps? (Android is good at this to the extent we often can't get proper tablet versions of our favourite apps.)
The other issue usability where Apple seem to be quite dogmatic. Anyone who owns one of the 5" ballpark phones knows that it doesn't work all that well when used one handed, especially if they've owned an iPhone.
What concerns me about Apple at this point though is actually that the cost of entry (i.e. the hardware costs) potentially stunts their growth as a services company. Nothing that would stop me buying an iPad 5 or an iPad Mini 2, but that could make me think twice, further down the line, with Google Play's inevitable growth and Amazon's dominance in books (not to mention Amazon's fast growing music sales).