There were more reasons why 1080p display was not chosen.
I wouldn't want more stress on the hardware (and less battery life) just to get more pixels I can't see on such a tiny device anyway.
Imho 1080p on a screen below 7'' doesn't make any sense whatsoever.
Did I get it right, that the HDMI-output allows 1080p?
I suppose you never tested real resolution in 5 inches 720p display.
I owned a phone with a 5 inches LCD IPS 1280x720 pixls display (same as Pyra) and I did the test.
I have attached the picture so you can do the test for yourself. It is a 1280x720 pixel resoluction image with lines at 1 pixel width (file weights only 9,5KB).
Please download this image in a phone with a 5 inches 720p display (watch in landscape so you get 1 pixel piture for 1 pixel image) and you will see pixels and full of sawtooths in all image. So, YES, you can see a better resolution would have been better. Even for emultaing scanlines, if you have more resolution, it is good.
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I don't really need 1080p on a device that I intend to use primarily emulating 480i displays. 720p should be more than enough, even with fancy effects (I like to emulate CRT curvature and scanlines as well).
It would just reduce the frames per second without much visible improvement.
Obviously if you only want to use Pyra to emulate 480p, you can have enough with a 720p display, but others want to use Pyra for much more than 80p emulation. For example I will use for emus but also as a general purpose pocket computer.
Even I don't know if you can get perfect scanline emulation of 480 lines machines: 480x2=960 lines, plus bordes if you want them, so you may be short in 720 lines display.
1080p would have been much better, and it was in initial specs, and cost was like the same. The problem come when they tough rotator chip was needed: the only one available only can handle 720p, so Pyra team decided to change display to 720p in that moment. After that of course you can say "It is better 720 because you can see bigger icons", etc, etc.
In any case we have a 720p Pyra so we must live with it, (now it isn't possible to change that) but don't say it is better or we don't need more, because720p is not a big resoluction for a 5 inches display we use near our eyes like in a smartphone.
You can do the test for yourself. I have just upload a 720p image with 1 pixel width lines in previous message, and if you use that imane at native image (in landscape orientation) on a 720p 5 inches smartphone you will see pixels and specially sawtooths totally clear.