The case against the 'iPad mini': Fragmentation and cannibalization

The case against the 'iPad mini': Fragmentation and cannibalization

Summary: 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.

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More rumors and speculation suggesting that Apple will release a mini version of the iPad later this year have surfaced today on Taiwanese news site Liberty Times.

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: CNETiSuppli Research.

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

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18 comments
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  • The iPad Mini will remain a bad idea

    right up until the point where Tim Cook says "one more thing" and introduces it. Then AKH, along with everyone else who said it was a bad idea, will suffer collective amnesia and start proclaiming it to be revolutionary and magical.
    toddbottom3
    • Because in your reality

      The universe is stagnant and never changes. Unless Microsoft changes something, then they are adapting to a constantly changing market and are geniuses.
      baggins_z
      • What?

        I didn't read anything in there where the mothership was criticized?? Instead he took a shot at AKH (and other tech media). Personally, I don't think enough shots are taken at AKH for his blogging work (use the term work loosely).
        mep01378
      • Hello? he didn't mention Microsoft, or anyone else.

        Though AKH did say [i]Apple would be simultaneously fragmenting and cannibalizing the existing iPad ecosystem by introducing a mini iPad[/i]

        Now, I'm thinking TB3 was offering a prediction, that being if Apple does introduce the mini, then AKH's sentence would change along the line of [i]Apple simultaneously releasing the iPad and mini iPad creates a more cohesive iPad ecosystem.[/i]
        William Farrel
    • No iPad mini

      Just a larger iPhone. With the smaller one still available. Best of all worlds. That's Apple for you. Give you what you want at a price you can afford. Go Apple!!
      The Danger is Microsoft
    • CORRECTION

      I think you mean resolutionary... LOL
      ubuntukungfoo
  • The iPad mini already exists. It's called the iPod Touch.

    Makes more sense to me that Apple create an iPod Touch model with a larger screen size (e.g., 5- to 6-inches).

    P.S. iPod Touch pricing currently starts at $199 U.S. and maxes out at $399 U.S.
    Rabid Howler Monkey
    • Yes!

      An iPad mini looks like cannibalization and fragmentation. A larger iPod Touch looks like the reverse. A larger screen for the 'Touch, especially if it were say 1024 x 768 would let it run iPad apps well. And we're the "Super Touch" to kind of slide into the place of the iPad 2, that would simplify the line...

      A slightly smaller iPad 2 / Super Touch could further differentials on price point while continuing to differentiate on screen resolution, etc. Apple might even implement a less costly plastic case...
      z2217
      • No to the hell!~

        Apple will not go the Windows OEM way and use cheap plastics.
        The Danger is Microsoft
      • Agreed, The Danger. Those solid steal and iron iPads

        are the best!
        William Farrel
  • I've estimated the iPad Mini's BOM...

    ... any price below $300 is extremely unlikely because Apple needs to maintain their gross margins above 25-30%.

    Here's the article - http://www.tech-thoughts.net/2012/05/ipad-mini-rumors-price-points-reality.html
    sameer_singh17
    • Start over here

      Apple is selling the entry-level iPod Touch for $199. Take that, add $40 in cost to it for a slightly bigger screen (just as we subtracted $40 in the article above), double the forty bucks to give Apple a 50% gross margin on the bigger screen, and we're still below $299 at retail.
      Robert Hahn
      • That's not quite how it works....

        Resolution, pixel density and processor - all matter. And their costs don't come up to just $40 above the ipad touch. The BOM estimates speak for themselves. I've based this on iSuppli's teardowns of the iPads and the Kindle Fire, so they're fairly robust.

        http://www.tech-thoughts.net/
        sameer_singh17
  • Dead wrong Adrian and here's why

    Though you make a lot of really astute observations rooted in conventional business wisdom I believe you're not taking into account that Apple doesn't play by anyone's rules but it's own. What's the practical reason to build a building completely out of glass? Apple is a 500 pound gorilla and it does whatever it wants to. No one else has more leverage on price and supply chain, if Amazon can do it, Apple can do it better.

    First off, the fact that the iPad2 was kept in the supply chain and we see the continued production of the iPad2,4 that uses binned A5X chips from the "New" iPad (3) that should say something to us.

    There's not going to be any fragmentation at least anymore than what's already here. Apple will simply up the pixel density when it shifts to a smaller screen keeping the same bitmap dimensions of the iPad 1 and 2. iPad mini with retina display. Apple needs a less expensive offering too in order to compete for the hearts and minds of schools. No one wants to give a kid a $400 piece of glass that has all of their textbooks on it. $199 that's an absorb-able cost. True there won't be much point to get an iPod touch but the iPod touch and iPhone will eventually merge and become different variations of the same product. They virtually are now. The iPod Touch is today what Steve Jobs originally wanted the iPhone to be. He didn't want to even use cellular carriers. Other than the Shuffle and Nano, the iPod brand will become less relevant. I'm amazed that the classic is still around. That's actually proof that Apple doesn't care about fragmentation as much as they would like you to believe. We already have 4 screen resolutions across 2 device categories in iOS 5.x. I expect Apple will eventually move away from static resolutions. Much like they're doing on the Mac. You'll just have Good, Better, Best. The aspect ratio is more important than resolution in the long run. This is what will change in iOS 6 and the iPhone 5.

    Mark my words the iPad mini or the new iPad 2 is coming and it will be smaller and competitively priced. If anyone can do it Apple can.
    ubuntukungfoo
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    nishanth123
  • Mini ipad - Don't sell this short; there is a market here.

    Would love to have one in this format and so would many others. I don't want an iphone because it is too small - at 30+ my vision can't handle it. The regular ipad is too big - it is just too large to handle for a man who does not carry a handbag. Every time I leave my car, I have to take it with me and hold it rather than risk theft. I don't like shopping one-handed. Give me a smaller 7.5 to 8 inch mobile device -- that's just right and one of the reasons I chose a Kindle Fire. However, provide me with a midsized screen with all the features of an ipad - I would seriously consider a purchase at a reasonable price - $299-350." After all I did buy the first e-ink Kindle for $399. There are always consequences to new product introductions and there will be some that will buy new "economy?" model in lieu of the super-sized-priced top of the line. I think Apple can take over a large segment of the android market if it will be brave enough to tackle it. But I am still gonna love my e-ink Kindle.
    P Possum
  • iPad Mini == Fragmentation in the App space

    Anyone who thinks conventional iPad apps could be operated satisfactorily on a 7" tablet, just doesn't get it. The smaller screen would require apps with refactored UI, or as Steve Jobs facetiously suggested, sandpapering one's fingers. Even a high-res screen can't solve the problem of accurately operating a miniaturized UI.

    Apple felt that 9" was required to support the level of quality and UI experience that they envisioned for tablet computing. Some apps could certainly be re-designed for a 7" tablet. With half the screen area or a normal iPad, they would tend to be more modal in order to expose the same number of UI elements, and require more scrolling and zooming to display the same content legibly. Just as not all iPad apps have an iPhone version, apps which push the limits of a regular iPad would not be released for the iPad Mini.

    With regular iPads still flying off the shelf, the question is why would Apple risk fragmenting iOS product line and app space in order to sell a less profitable compromised tablet. I could see it if the market had rejected the current iPad, but that is clearly not the case. Apple neither wants nor needs to compete with low-end products which would only tarnish its brand.
    immovableobject
  • Failure by design

    The 7" screen is too small to view a full sized document without panning and zooming and too big to fit in your pocket. It is a kludge that the marketing departments of Apple's competition came up with. 7" is a random size that they could claim they sold but that Apple didn't.

    Why should Apple further fragment the platform just to copy that? If I were Apple I would cede the kludge market to them and just concentrate on their own products.
    Tigertank