The case against the 'iPad mini': Fragmentation and cannibalization
Citing "market rumors," the site claims that the long-rumored iPad mini will make an appearance at the end of the third-quarter or sometime during the fourth-quarter of this year.
The site claims that AU Optronics and LG Display will be responsible for the LCD panels, while the backlight units are to be produced by Radiant. It also claims that the reason for Apple's introduction of a mini iPad is market pressure from devices such as the Barnes & Noble Nook and Amazon's Kindle Fire, both of which are smaller and cheaper than the iPad.
Backing up this claim is Barclays analyst Ben Reitzes. He claims that there is "some evidence of this product in the supply chain" but adds that it is likely to wind up "in the iPod touch category if it indeed sees daylight".
What's wrong with a mini iPad? To understand why it doesn't make sense we need to step back and take a look at the bigger picture.
The Kindle Fire is without a doubt a runaway success and now owns over half the Android tablet market. But how much of this success is down to the 7-inch screen, as opposed to the $200 price tag, or the Amazon branding?
If it is low pricing that people want as opposed a smaller screen, then it is unlikely that Apple will be dragged into a price war with Amazon.
While on the subject of pricing, how much would this mini iPad even sell for? This is a particularly important question given that the full-size iPad 2 now retails for $399, and you can pick up an iPad 3 starting at $499. Take a look at the bill of materials estimate for the iPad 2 and iPad 3 drawn up in March by iSuppli Research:
The cost of a 16GB Wi-Fi iPad 2, which is down as a shade over $245. We can take this as a starting price for the mini iPad.
A smaller iPad would have a smaller screen, smaller touch screen and, one would assume a smaller battery. But how much realistically can these smaller items shave off the price? Even shaving $40 off the overall bill of materials and manufacturing costs would mean that even at $299, the mini iPad would have the smallest gap between the bill of materials plus manufacturing costs of any iPad.
It just doesn't make sense that Apple would release a mini iPad; a device that could potentially cannibalize sales of the more expensive models at such a poor margins. A mini iPad might make sense if iPad sales were flagging, but there's nothing to suggest that Apple is having a problem selling full-sized and high-margin iPads.
Then there are the issues related to small screens. As pointed out by the Nielsen Norman Group, small tablets are not for everyone because the user interface elements are too small and content isn't optimized for a screen that's bigger than a smartphone yet smaller than that of the iPad.
In other words, Apple would be simultaneously fragmenting and cannibalizing the existing iPad ecosystem by introducing a mini iPad.
The bottom line: I'm not holding my breath for a mini iPad to make an appearance any time this year.
Image source: CNET, iSuppli Research.
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