Why Apple doesn't need a 7-inch iPad

Why Apple doesn't need a 7-inch iPad

Summary: All Apple needs to do is watch while Amazon and Google simultaneously annihilates the competition and drives the price of Android tablets into the ground.

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TOPICS: Apple, Amazon, Android, Google
56

Google's launch of the "Jelly Bean"-powered Nexus 7 has reinvigorated the discussion that Apple needs to augment the 9.7-inch iPad with a smaller 7-inch model.

However, just because Google does something doesn't mean that Apple needs to follow suit.

According to Patrick Moorhead, president and principal analyst of Moor Insights & Strategy, Apple needs a 7-inch tablet because without one the Cupertino giant face the prospect of losing market share and profit dollars.

"The Google Nexus 7 will sell well," writes Moorhead, "which is good for Google, Android, ASUS and NVIDIA, but bad for Apple, unless they act before the holidays".

Here I agree with Moorhead. Amazon's 7-inch Android-powered Kindle Fire has seen great success despite the fact that it remains a very basic tablet. In fact, while the Kindle Fire has undoubtedly stolen market share from Apple and its iPad, the biggest casualty of Amazon's tablet has been other Android tablets.

In the space of just a few months, the Kindle Fire became the most popular Android tablet, capturing 54 percent of the market and hammering the competition into the ground.

Moorhead also believes that Apple could find a 7-inch tablet profitable:

"Apple would be very profitable as well, as the most expensive piece-parts of a tablet are the display and touch-screen, which are priced somewhat linear with size. Apple may have redesigned some of the innards of the new iPad 2 as they lowered the price, but not nearly enough to offset the $100 price reduction, so a mini-iPad would be additive, not dilutive like the $399 iPad 2."

Let's put on one side for the moment the whole subject of how and why 7-inch tablets suck because the user interface is too fiddly and most content is either designed for 10-inch tablets or smartphones and concentrate on a single issue: price.

There's a price war coming. Amazon defined the budget-end price of 7-inch tablets with the Kindle Fire at $199, but now that Google has entered the market with the Nexus 7, and priced this far superior tablet also at $199, Amazon only has one line of attack open -- slash the price further.

Think that it's not possible for Amazon to cut the price of the Kindle Fire any further? Think again.

Last week a rumor surfaced claiming that Amazon was preparing to both unveil an updated Kindle Fire 2 tablet while slashing the price of the existing Kindle Fire to $149.

And this is why Apple doesn't need a 7-inch iPad.

The 7-inch tablet market is already racing to the bottom, and while there's no doubt that Google and Amazon are going to capture market share, it will be at the detriment of higher-priced Android tablets. We've already seen how effective the Kindle Fire has been against the Android-powered competition, and the Nexus 7 is just going to make it even harder for Android tablet OEMs to carve out a market.

All Apple has to do is sit back, watch while Amazon and Google simultaneously annihilates the competition and drives the price of Android tablets into the ground, and keep making 9.7-inch iPads and selling them at a healthy 30 percent profit margin.

Topics: Apple, Amazon, Android, Google

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56 comments
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  • Pushing iOS down the stack . . .

    While maintaining a 30+% profit margin on a 7" tablet. At a minimum, it's incremental revenue and it makes it harder for MS to push W8 into 7" tablets. Basically in three years time, there will be four ARM tablet vendors: Apple, Google, Amazon and maybe MS if they don't screw things up. Apple has Foxconn. Google has Motorola and Acer. Amazon has Quanta, and MS will have Nokia and an OEM to be named later. HP, Dell, Lenovo, et al, will all be scraping over what ever amount of market share W8 x86 carves out.
    jjworleyeoe
    • You're assuming

      Nokia will be around in 3 years time. It doesn't seem likely! Unless it gets a nice rescue package from MS.
      wolfn11
      • nokia will be taken over

        I'm predicting in a few years, Nokia will be taken over by either Apple, Microsoft or Google.
        sizlaqq
      • Nokia was destroyed

        by an ex MS employee
        http://www.zdnet.com/blog/btl/nokias-microsoft-deal-leads-to-shareholder-revolt-call-for-a-plan-b-updated/44870
        theo_durcan
  • Hmm

    If Apple ignores that segment then they will be second it Tablet Marketshare as well... That segment clearly keeps on growing and the 10" alternative tabs are getting a lot more attention.
    slickjim
    • As I've said market share means what exactly? While it is clear

      PROFIT means everything....

      Pagan jim
      James Quinn
      • Yes and

        Samsung Profit % is growing while Apple's is shrinking! Do you really think profit doesn't follow marketshare?
        slickjim
        • Citation required.

          "Samsung Profit % is growing while Apple's is shrinking!"
          Please provide a reference for this ridiculous claim.

          "Do you really think profit doesn't follow marketshare?"
          I certainly do, and if you don't simply look at the Macintosh. Apple's market share has been single digits for decades, but Macs have been profitable for nearly their entire history.
          matthew_maurice
        • Samsung is a very large company with fingers in many area's....So while I

          have NO proof that Samsung's profits are growing (You provided no such proof). Still it would not surprise me....Still that means what exactly? Samsung's profits could be growing in any number of area's/markets Apple does not compete in while their profits in say tablets and or phones might be small indeed. As for Apple's shrinking profits I've certainly not heard that from any source so again I must insist you provide proof of said statement.

          Pagan jim
          James Quinn
        • That's why

          Apple is losing so much money.

          They just can't hold on to market share...

          Neither can Porsche... They'll never sell as many cars as Chevrolet...
          mtdoonmeister
      • Yes but don't forget where that margin comes from

        I think it's foolish Apple does not get into the 7" market. First they can charge $100 more than the competition and the faithful will trot out to pay it. Second don't think the 30% margin comes just from hardware! Apple is making bank of iTunes and other sources too.

        Soooo, if they make an average of $75 per year in iTunes per tablet, that would be regardless of size. So their margin would probably not go down. Say $150 hardware profit on the 10" and $100 on the 7"(with a lower retail of course) plus $100 each for two years of iTunes. And this effectively without risk, we know people would buy them, probably even current owners of the 10" iPad!
        stano360
    • They don't need a 7 inch.

      Has no one been paying attention to the iPhone? What Apple will do with the iPad is what they been doing with the iPhone. They will not make a 7 inch, they will push the iPad 2 price down, get rid of the 1 and put the iPad 3 in the middle when the 4 comes out.

      When the iPad2 gets down to the price level of the Nexus 7 (199 - 249 range) its going to start to put pressure on everyone. Its as good as the 7 if not better and its larger for around the same price. Thats pressure. Amazon is going to do the same to Google.

      Google is gonna get the squeeze.
      tymiles
  • Let's not put it aside quite THAT quickly...

    "Let's put on one side for the moment the whole subject of how and why 7-inch tablets suck because the user interface is too fiddly and most content is either designed for 10-inch tablets or smartphones..."

    You're making two assumptions here - neither of which, in my opinion, are valid.

    The first is the one Jobs made: you can do everything perfectly with exactly two sizes - 10 and 4. In fact, for things like pocket book reading, 10 is too large and 4 is way too small. 7 is almost perfect. The size is a perfect fit for the hand, and is still small enough to carry in a jacket pocket.

    The second is that apps are made with a specific size screen in mind. Some are, especially Apple apps - so for iPads, your argument is actually valid - but not so much on the Android side where apps can more easily reflow to match screen sizes. Google's Rubin has been arguing that people should stop writing Android apps to specific screen sizes exactly because it causes this sort of issue. Anyone who's written Windows or MacOS X apps won't have difficulty with this since we've been doing it for over 25 years.. the problem is the lazy newcomer, typically starting on iOS where there is one mandated screen aspect ratio and a very limited range of resolutions.

    Even Apple is changing. Their next OS will include automatic layout flow to handle different resolutions and aspect ratios.

    Arguing that 7" tablets are a waste of time because past software can't use it perfectly is backward thinking. Consider it this way: more 7" tablets means more developers who can't rely on exactly two sizes in one aspect ratio and have to actually put the effort in to make their apps work on anything.

    This is a GOOD thing.
    The Werewolf!
    • "..for things like pocket book reading,...

      ... 10 is too large and 4 is way too small. 7 is almost perfect." Agreed. That's why I got a Nook Simple Touch for book reading. That's about the only use I can think of that the 7 is ideal for.
      Userama
    • Its a marketing kludge

      The 7" tablet fills the slot that Apple left open. It became popular because it avoids competing with Apple.
      It is kind of a jack of all trades master of none size. Too big to fit in your pocket-too small to work well with full-sized documents. And since almost everybody who would buy one also has a smartphone, there is too much overlap and not enough added functionality.
      Tigertank
    • The problem with scalable apps

      At this year's WWDC, Apple introduced auto-layout APIs for iOS which can aid in writing apps with user interfaces that can adapt to different screen orientations and (to some extent) sizes. While this helps in positioning content and controls to make the best use of available screen space, it can't solve the problem of shoehorning a complex and already dense standard 9" iPad app onto a 7" screen.

      Writing good apps for a 7" iPad would, in many cases, require developers to refactor the user interface in non-trivial ways (splitting functions into modal dialogs, separate tabs or hierarchical screens, etc). App developers are already having to do this in order to support both the iPhone and iPad form factors. Adding a third form factor will only make their lives more difficult. It's called fragmentation, and is something to be avoided.

      All this having been said, Apple may eventually deem it appropriate to introduce an mid-sized iPad, but it is not clear that they will be compelled to. After all, Apple avoided competing in the race to the bottom in the netbook market, despite cries from the peanut gallery to do so.
      immovableobject
    • Obviously, you're not a developer...

      Making an app so that it works with various resolutions is ridiculously difficult... That's why so many apps ARE fixed in resolution. Buttons at the sides, top or bottom all must move to account for differing screen sizes. The screen real estate of a 7" tablet is way too small to use an app written for an iPad, for example. In my latest app, I use buttons that are near the minimum of Apple's recommended UI guidelines... so I would have to (somehow) make bigger buttons... except I simply don't have room to do that. Also, and here's the one you really don't want to hear: THERE IS NO MONEY TO BE MADE MAKING ANDROID APPS! Yeah, sure, you can get Angry Birds and Twitter, but you will NEVER see my app or thousands of others made by people who are smart enough to NOT get involved in a sure-fire money-losing effort. If you can show me a single indie developer who claims to be profitable from an "Androgenous" app, I'll show you a liar. The 7" tablet is the junk market for tablets. People who are uninformed buy these things based on price alone, but find they are envious of iPad users whose tablets operate smoothly, have vastly more QUALITY apps to choose from (i.e., from real developers and not fanboys writing fart apps after work as a security guard), AND a bigger, more useful touchscreen. An iPad 2 is still a vastly better tablet than any Android tablet made so far, and Samesong's new "Retina" tablet will be an exercise in expensive hardware with no apps to make use of it (unless Samesong pays Rovio under the table to make all the new bitmaps required).
      eastmont
      • HOWEVER... a bigger iPod...

        Just wanted to add to my comment... I did not rule out a larger iPod coming. That is actually a killer idea... and it's all about leverage. Apple will leverage the 100,000's of apps that run on iPhone/iPod Touch, leveraging the high resolution of said apps that are Retina sizes to create a 6" iPod "Reader" that still has great resolution at that size. They can then leverage the hunger people have for a better alternative to the Nook or Fire (with the ability to read iBooks for school textbooks, or Kindle for the latest novel, AND play a nearly limitless number of iPhone games on a bigger screen, AND use it for a camera, possible GPS, etc., etc.) iPad mini? No way... iPod Reader? I have an iPad (love it) and now I want this too!
        eastmont
        • Hmmm... on further reflection...

          (and more and more "leaks")... I guess this IS going to happen. So... I suppose there ARE some ways to do something in both hardware an/or software to make a smaller iPad work:

          Hardware: A more accurate touchpad or pressure sensitivity might just make a difference. If the device can discriminate or discern the touch intention better, AND the screen is not TOO much smaller than the iPad, this might work. BUT developers would do well to limit the minimum size for controls (I'm now reviewing my latest iPad project's interface before release). Lately I was thinking the smaller "iPad" could be a larger iPod, but I think ultimately Apple will want to spread the iPad "goodness" to the most people (iPad apps are just so much better because of the size of the real estate).

          Software: Since Apple is the supplier of the SDK for iOS, i.e., Xcode, they could introduce new APIs to assist with UI crowding problems. IF Apple wanted this, they could make some kind of connection (or several *different* types of connections) between an app developer's own declared buttons and the selection of same via a specially tuned or tunable method of getting info from the touchpad. I have some experience with the x/y coordinates that are returned to the iPad from the touchscreen and the data is up to the app developer to interpret. If Apple would actually interpret the touch or gesture for me, and send me a clear message such as "button 1 touched" rather than "x = 512, y = 384" they might be able to intercept several frames (1/60ths of a second) of user input data for me and use an algorithm to assist in selecting my onscreen button.

          Even the assertions that Apple will never sacrifice their margins might be wrong. Apple might surprise everyone and sacrifice some margin at this point to get more people into the ecosystem(s). Even though apps are an extremely important part of the content ecosystem, their sales have not contributed much to Apple's bottom line so far. However, the number of Apple devices proliferating throughout my own house now represent an ecosystem of their own... a hardware ecosystem. In the end people will be hooked into BOTH of Apple's ecosystems... that might be a smart for Apple at this point.

          Now I need to buy one for testing... to add to my iPad 1, 2, and "new" (can we just call it 3 now that's soon not to be "new" anymore?). At least I don't need to buy 100 Android tablets to test (i.e., I don't develop for platforms that don't make a profit... sorry Android). They'll probably sell 100's of thousands to developers alone!
          eastmont
  • ... and the Gorilla is??

    Everyone is ignoring the gorilla in the corner.... Samsung.

    It has the power to upset 7 inch and 10 inch markets.... as Apples almost frantic efforts to stop Galaxy 10.1 has proven. If Google also focuses its attention on a Nexus 10, and the cool kids embrace Androids even more, it is Apple that is toast.

    Complacency is one of Apple's biggest enemies ... they should not sit back.
    FiberLover