Mini iPad - the numbers just don't add up

Mini iPad - the numbers just don't add up

Summary: 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 iPads.

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Lots of speculation today that Apple is working on a mini version of the iPad, a device that, if the rumors hold true, will cost anywhere from $249 to $299.

The story seems to have originated on Chinese net portal NetEase. As well as the low price tag, the rumored device has a 7.85-inch screen running at 1024 x 768 -- same as the first- and second-generation iPads -- and there will be an initial 6 million units available at launch.

This mini iPad rumor isn't new, there's just a little more "detail" this time around. I still don't understand the logic of why Apple would make an iPad that's less than two inches smaller than the current offering. A 7-inch tablet would make some sense, since it would complete directly with Amazon's Kindle Fire. But even that doesn't make much sense given that 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 the iPad.

But screen size issues aside, the numbers don't add up. Take a look at the bill of materials estimate for the iPad 2 and iPad 3 drawn up last month by iSuppli Research:

Before we go on, let me remind you that these figures are estimates, but I believe that they are close enough for our purposes here.

Now take a look at the cost of a 16GB Wi-Fi iPad 2. It's 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 (BOM) and manufacturing costs would mean that even at $299 the mini iPad would have the smallest gap between BOM 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.

My guess is that the $299 price tag is a stab in the dark. With the 9.7-inch iPad 2 now starting at $399, there's not an awful lot of room price-wise to fit in a mini iPad, so $299 will have to do.

The mini iPad is a solution to a problem that simply doesn't exist.

Image credit: iSuppli Research.

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Topics: Apple, Hardware, iPad, Laptops, Mobility, Smartphones, Tablets

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23 comments
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  • There's already TWO "iPad Minis" on the market

    iPhone and iPod. How many more iOS devices do people need?
    The one and only, Cylon Centurion
    • Why not

      If people buy it then what do you care.

      Should they go out and buy 10 Windows desktops instead?
      ScorpioBlack
  • Don't underestimate Apple's sourcing abilities.

    I don't know if Apple will do an "iPad Mini", but I do know that if they do it will have a 35%+ margin.
    matthew_maurice
    • Don't think "iPad Mini"

      Think bigger iPod Touch. That's definitely a possibility.
      smulji
  • It will appeal to some.

    Some will like the smaller form factor.
    Closer pricing point may hurt kindle and others
    DevGuy_z
  • iPad mini?

    If Apple does produce an iPad Mini, would that make the amorphously named third gen iPad the 'Maxi Pad'? Hey, I AM an Apple Fan, but I don't care who you are, that's funny!
    dheady@...
  • For people who want the size, not the price, Apple could sell iPad Mini at

    ... $349 -- this would give them great margins and satisfy demand for more mobile iPad. In a year from release, they would be able to lower price to $299, safely keeping good margins. People who want quality product and quality platform would not hesitate to spend this much, because they are not buying lesser product -- they are buying only more compact one.

    The UI problem could be solved by implementation of Apple's patent that would scale up UI in the place to where user moves his/her finger -- before the actual touch. There is technology for that (similar to Termenvox), so it is not impossible.

    Jobs was not against smaller tablet per se, he was against smaller tablets because these would require "a file" to make fingers twice smaller for UI elements. If this problem is solved, then iPad mini would be fine product.
    DDERSSS
    • A Typical Apple Apologetic

      "Jobs was not against smaller tablet per se, he was against smaller tablets because these would require "a file" to make fingers twice smaller for UI elements. If this problem is solved, then iPad mini would be fine product."

      So, it would easily solved by giving out a file to file your user's finger down is it?

      Please, no, Job was made very clear that "anything smaller than 10 inch is too small"... and he never saw Kindle Fire coming.
      Samic
      • 5 million Fires versus 65-70 million iPads is "coming"?

        No wonder that, according to Cook, Apple did not notice (Amazon Kindle Fire and Apple iPad are too different products; those basically almost do not compete).

        And no, Jobs was made very clear that anything less than 10" is too small only because the UI normally would be super tiny. But with Apple's patent (which was submitted in Jobs' time) [b]this UI problem -- that would otherwise require, according to Jobs, a "file" to deal with too big fingers -- will be solved.[/b]
        DDERSSS
      • Size

        Many women agree with the statement 'Anything less than ten inches is too small'. Personally I have always gotten the job done with a 4.5" screen. After all it's not about the size of the screen, but how you use it.
        suicidy
  • Three words, Adrian: First Mover Advantage.

    Apple learned from the iPhone and iPod that first-mover advantage is always only temporary; and in the case of the iPhone, it can disappear very very quickly.

    Right now, Apple enjoys FMA on the iPad, but there is a lot of competition coming down the pipes, and some are already sporting smaller displays and smaller prices. As for your numbers - by your own admission these are estimates (though good ones), and managing materials costs is one place Apple absolutely shines. If any manufacturer is able to find a way to get those numbers down, Apple will be that manufacturer.

    The biggest reason Apple would come out with a smaller tablet even in light of temporarily smaller margins (which would likely improve over the next year and a half, as manufacturing ramps up), is that they are aware that the tablet market, like the smartphone market, is nowhere near saturated, and it has many gaps yet to be filled (gaps currently being targeted by Android).

    They will make the same play that worked for them with iPods - come out with many similar, but not exact, models at price points that cover most of the gaps in the market while they still have first-mover advantage. The reason for the smaller display has nothing to do with materials costs - it has to do with making the differentiation between the premium model and the "basic" model one that is tangible and easy to spot.
    daftkey
  • It was all a joke......

    Lol, and all this time I thought Apple was being clever. Silly me.....mini iPad? I thought that's what the iPhone was.
    James Keenan
  • Once upon a time...

    ...the iPod was hot, hot, hot. There was a rumor that Apple would bring out an iPod mini but the smart folks said that would never happen because it would cannibalize the big iPod. Of course, Apple did produce it because they understood that if you don't cannibalize your hot products somebody else will. I wouldn't be too quick to write this rumor off.
    gfeier
  • Selling them as fast as we can make them

    It may be that they've locked up all the 10" retina display supply for the foreseeable future, and they think they could sell more units if only they had more displays. Perhaps they've discovered a source of smaller retina displays that could mean incremental sales this year.

    I don't see why it's necessary to meet Amazon on price just because your display size is the same. People aren't buying these things by the inch; if they were, the Androids would be selling better.
    Robert Hahn
  • A 7" device works well as an ereader

    and just about nothing else. There's a reason the Kindle is the only 7" tablet doing well. It's just for reading books.
    baggins_z
    • Nonsense

      A 7 inch tablet is good for just as many things as a 10 inch tablet...and it has the added advantage of portability and less mass, making it easier to hold in your hands for long periods of time. I have carpal tunnel syndrome, holding a 10 inch tablet for more than a couple minutes hurts like hell.
      Doctor Demento
  • iPod Maxi or iPad Mini

    Call it what you want. If Apple had realeased a 7" tablet I'd own one. And if Apple released a tablet similar to the ASUS Tranformer I'd own that, too. And they would be my primary computers for day to day activities, with my Windows machines relegated to work related duties.

    Instead, I've got an HTC Flyer and am eyeing the ASUS Transformer 300 with interest.

    It's unfortunate, though, that I have to choose between the hardware that best fits my needs, and the more polished and extensive App ecosystem.
    dsf3g
  • You're thinking is off....

    You're correct that a mini-iPad would have very low margins compared to what Apple is currently making. The iPad has seen great sales growth, yes. But it has seen a sharp market share decline at the same time - meaning, competition (particularly) the Kindle Fire is growing faster, because of lower price points.

    This year we're going to see significant low priced tablet launches, let by the Nexus tablet & new Kindle Fire. These are going to have an even more significant impact on the iPad's market share and may impact analyst estimates, and hence, stock price.

    Now, Apple's decision is to maintain volume growth at lower margins or hope the volume growth doesn't slow down too much at current margins.

    I have an article somewhat alluding to this here - http://www.tech-thoughts.net/
    sameer_singh17
  • Mirasol screen...

    An iRead with a Mirasol screen would be a stunning coup! Color, movies and a week long battery life is unbeatable. This would put a dagger straight into the heart of the Kindle Fire. Apple could take a page from the Microsoft playbook and sell them at par or at a loss (like the XBox) to gain market share.
    Tony Burzio
  • Doesn't need to be cheap

    Some people just prefer the smaller form factor. There's something appealing about a device you can hold in one hand. I think Jobs was wrong on this, Cook knows it and Apple will produce such a device.
    The Star King