For some time now pundits and various rumor sites have been murmuring about a secret smaller iPad Apple has been developing to compete in the budding smaller, less expensive tablet market. Dubbed the ‘iPad Mini‘, the only thing that the rumors agree on is that the tablet would come with a 7 inch screen (as opposed to the existing iPad’s 9.7 inch screen) similar in size to Amazon’s Kindle or the new Google Nexus 7. The smaller device would likely still sport a version of Apple’s Retina display, but be somewhat less powerful than its larger sibling allowing Apple to meet the $199 price that many of the devices in this category have.
The latest rumors come to us from Bloomberg via MacRumors. Bloomberg argues that competitors haven’t been able to compete head to head with Apple, but they have found some traction selling devices that are smaller and easier to carry. The Kindle Fire and Nook Color were the first big names sporting this form, and the Fire had respectable sales figures during its first year in production (although those numbers have tailed off significantly as of late). Google’s Nexus aims at this new subcategory, with a matching seven inch screen that could more easily be held in one hand or stowed in a purse or large pocket.
Apple, thanks to strong strategic positioning and manufacturing has been able to sell the iPad at the same price point for each generation, yet still generate a profit of close to two hundred dollars for even the lowest priced model. They compound this profit by the sales from their ancillary services: the App Store, iTunes music and video, iBooks, and direct sales of accessories. Google is selling their new Nexus 7 at or possibly below cost as a loss leader, hoping to generate profit by channeling users to their core business of advertising and new multimedia retail site Google Play. It’s not unreasonable to expect that Apple could leverage their current manufacturing might to crank out a smaller, less expensive iPad that could still generate a profit via sales of the device that would still offer the same secondary sales that the current iPad does. This would also provide a competitive advantage over Microsoft’s soon-to-be-released Surface lineup. Apple would have devices with a more complete ecosystem, more mature app store, more accessories, and with the addition of a Mini tablet less expensive models as well (although the iPad is likely to be less expensive than the x86 model of Surface running a full version of Windows 8; they have been stated to be priced to compete with ultra books that range from $800-$1600). The iPad Mini would steal all market buzz from the newly-released Google Nexus, as well. Google needs to have a sizable market presence for the Nexus 7 to be financially worthwhile, but a similarly priced and formed iPad would likely garner more attention and sales.
There are some valid reasons that Apple would decide not to bring a seven inch tablet to market. Such a device would likely cannibalize sales from existing iPads more than competing tablets. The smaller tablet would run the risk of fragmentizing iTunes apps, as they could require different resolutions and icons between the those of the iPhone/iPod Touch and existing iPad. Steve Jobs went on record more than once panning the seven inch form for tablets, pointing out that there isn’t enough differentiation between them and smartphones. While devices with a seven inch screen have been spotted in the wild, Apple routinely field tests devices that never make it to market.
I fall on the side of approving of the smaller form factor. While I wouldn’t likely buy one, I do like the size of the seven inch tablets I’ve tested; they fit one hand comfortably but offer enough extra screen and case size (think larger battery) to offer consumers some unique value. The Bloomberg report suggests that the Mini iPad would sport the same screen resolution as the Retina iPad (1024×768 pixels) eliminating the fear of fragmentation, and could take the place of the iPad 2 as Apple’s less expensive tablet. I have little doubt that Apple could sell the smaller iPad for $199, the question is can they do so without sacrificing performance or features while generating enough profit to make the move worthwhile?