Sony has decided that in the premium smartphone market, smaller can be more beautiful. Rather than competing with the ever-growing screens of rivals such as Samsung or LG, its new Z1 Compact phone has a 4.3in screen – far smaller than the 5in of the Samsung Galaxy S4 or 4.7in HTC One.

“With the Z1 Compact we have invented our own market segment: the premium compact Android smartphone,” Pierre Perron, head of Sony Mobile Europe told the Guardian.

Sony thinks that there is a significant market for a more manageable Android phone that fits smaller hands, compared to the 5in and larger screen size trend, while not compromising on specifications.

The company reckons the current trend for larger and larger screen sizes, as demonstrated by Samsung's ever expanding Galaxy S and Galaxy Note line, is getting out of hand for consumers. There is some backing from data, collected by US research firm NPD, which suggests that 75% of smartphones in use in the US have screens smaller than 4.5in.

Sony has squeezed all of the components from its larger flagship 5in phone, the Xperia Z1, into the Z1 Compact's smaller frame with a 720p high definition screen which, at 340ppi, has a higher pixel density than Apple’s 4in iPhone 5S with its 326ppi “retina display” screen.

Small, but not cheap

Sony’s biggest challenge with the Z1 Compact is persuading its target audience – the mainstream consumer – that a smaller phone doesn’t mean a poorer experience, something of which Perron is acutely aware.

“We have a strong opportunity to address a new, underserved segment with the Z1 Compact, something Sony did not target in 2013, but we must successfully make the point to the consumer in our marketing that this is not just another cheap, small Android smartphone,” Perron said.

It's expected to go on sale for between £400 and £500, though Sony wouldn't confirm a price ahead of the announcement.

The Xperia Z1 Compact features a 2.2GHz quad-core Snapdragon 800 – currently the most powerful ARM-based mobile processor available in smartphones and tablets – a 20.7-megapixel camera, NFC, 4G LTE and a solid, waterproof build that makes it feel every bit a premium Android smartphone, but smaller than the trend. It has a “class leading” 2,300 mAh battery, which Sony says should last a day of heavy usage. It runs Android 4.3 Jelly Bean, but with a promise from Sony to update it to the latest Android 4.4 Kitkat.

Sony argues that its rivals' smaller-screened phones, such as the Samsung S4 Mini or HTC One Mini, are compromised by having slower processors and less RAM than their full-size siblings, meaning they offer poorer performance.

Taking aim at the iPhone

The Z1 Compact aims to take sales from Apple’s 4in iPhone 5S, which up until now has only been challenged by much larger 5in phones that are more difficult to handle, especially one-handed.

“To continue our growth year in 2014 to cement and move forward on our number three position in the UK and Europe, we need to compete with the likes of Samsung and Apple,” said Perron. “We are accelerating the pace of technological integration from the other parts of our company, such as our camera and television businesses, into Sony Mobile and the result is the premium experience offered by the Z1 and new Z1 Compact.”

To help Sony compete with Apple and allow easier switching from the iPhone to an Android phone, Sony has also launched a range of applications that automate the transfer of data between different phones using Wi-Fi or a USB cable. iPhone app and content bought from iTunes will still not be able to be transferred, of course.

“Xperia Z1 is a no-compromise feature-packed smartphone with a beautiful yet durable design. With Xperia Z1 Compact, we bring all of these premium features and performance into a smaller size to give you the ultimate compact smartphone,” said Kunimasa Suzuki, president and chief executive of Sony Mobile Communications.

The Sony Xperia Z1 Compact will be available in the UK and other markets in February, in a range of four colours: pink, yellow, black and white.

• The Sony Xperia Z1 featured in our rundown of the best and worst phones of 2013