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It plays YouTube videos in HQ, but then again so did the Galaxy S3 original, it's not a big drop in quality. I am very happy with this smaller replacement, it has all the features of a Galaxy S3 with smaller hardware specs
it doesn't have HD screen, so no, it can't play HD. however it does play 480p videos, called HQ in youtube app, which will look somewhat HD cause that's near the native resolution.