Steve Jobs (and lately Tim Cook) have dismissed 7" tablets considering them irrelevant and DOA (dead-on-arrival). But lately that has been significant chatter that Apple is testing screens for an iPad of that size. When it comes to Apple however, nothing is certain till you actually see the product or service unveiled in a fancy "media event". Until then it is pure speculation.
However I am sensing that this particular rumour could indeed be true. And here is why ...
The Kindle Fire ($199) and the Barnes & Noble Nook ($249) have been the only significant competitors to the iPad in terms of selling significant numbers. The HP Touchpad sold a few as well as part of the fire sale at prices in the $100 - $150 range. The Blackberry Playbook, since the release of a significant software update, is also now selling at $199 and by some accounts, appears to be doing better.
The iPad obviously has no issues competing against full-size tablets (and by full-size I mean the 9" - 10" range). It appears to pretty much own that market right now. When competing against the 7" devices mentioned above, it has a bit of a problem simply because of the price. For the $500 that the iPad demands, you could get two of the completing 7" devices. While everyone sees the value in the iPad, that price difference is not insignificant. And that is perhaps why the Kindle Fire and the B&N Nook have sold so well.
In light of this competition at the lower end, I had anticipated (read "hoped") that the new iPad would be priced at $399 and the iPad 2 would continue to be offered at $299. At those price points, the new iPad would definitely kill off anyone else competing against it head-to-head. But with the significantly cheaper iPad2, it would also steal away most of the budget conscious buyers looking at the cheaper tablets. For $100 more you get a screen that is almost twice as large, dual cameras, Facetime, the whole iOS App ecosystem as well as the Apple brand cool factor. What's not to like?
This would have been an extremely aggressive move by Apple because it would require them to leave some money on the table (Even at the current prices, Apple is selling every iPad it can make. So why lower the prices and hence cut out the profit margin?) But they could then be guaranteed to own both ends of the market. Maybe forever.
Instead they left the new iPad pricing at $499 and lowered the iPad2 to $399. While the $100 price drop is nothing to sneeze at, it is still twice the cost of the Fire. Maybe they should've re-introduced the original iPad and sold that one at $299. [Similar to the iPhone strategy of selling 3 versions / generations of the product line at 3 different price points.]. That would've had the same effect while maintaining their profit margins. The original iPad would be good enough to win customers over the Kindle Fire but would still be significantly inferior to the iPad2 and the new iPad that it wouldn't affect their market.
So the threat from the cheaper tablets still remains, though it is likely a little bit contained thanks to the $100 price-cut for the iPad2. But that $299 price level still awaits a product. And that is where I believe the iPad mini comes in. Apple could introduce the iPad mini at $249 or $299 with a 3G / 4G version at $349. At those prices they would still make money (the iPad2 is estimated to cost about $250 to make, so Apple could definitely make the mini version at $200 or even less.). And more importantly they would seriously damage the value proposition offered by the Kindle Fire or the Nook or the Playbook. The Fire at least has the Amazon Prime card in its pocket to help it try to convince potential buyers. The Playbook has nothing.
If the estimates are the believed, about 6-8 million of the 7" devices were sold last quarter. I'm sure Apple wouldn't mind taking a share of that market. So is the iPad mini a certainty? I have no idea. But it sure looks that way. If there were no plans for the mini, Apple would've brought back the original iPad at $299, just to show the likes of (Amazon and B&N and RIM) who's the boss.
Is there going to be a 7" iPad?
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