Back to my original question, do people have genuine issues with 12 inch
screen size?
Of course they do, but people will have issues with basically everything, because computers are used for so many things.
If you're an average graphic designer, 12 inches is just too small. The 1024x768 resolution doesn't provide enough real estate for all the palettes. In theory, you can make the resolution (density) bigger to some extent, but then the pixels will be just too small for human eye. You will have to make the widgets/fonts bigger, and you're back to square one. Remember you're talking about people who Apple designed 30-inch LCDs for. Including the possibility of putting two of them side by side.
For other uses, 12-inch displays might be perfect. Keep in mind that people were using 9" Macintoshes (or even those tiny 5" screens on Osbornes earlier) and getting their work done.
(I've deliberately left out the distinction between portable and stationary computers, which was absent in the original question.)
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