But would Apple get even more aggressive? After all, the iPad 2 supply could be limited, and once they’re gone, then its cheapest slate would only be $399, which more Android tablet makers can match (like the Sony Tablet S). Could the company drop the iPad 2 price all the way to $199 to match the Kindle Fire and then charge $299 for the new entry-level iPad 3?
Currently, the entry-level iPad 2 sells for $499 (16GB, WiFi), but the rumor mill is in full swing and is speculating about a $100 price drop for the entry-level units, with a higher-priced 'retina display' model with a 2048x1536 being available for $499.
I have several problems with this.
I'm not convinced that Apple will release a 'retina display' iPad 3. While it's a sexy idea, a 2048x1536 screen is really dense and would play HD 1080 videos windowed which would mean the density would work against the device for media playback. It also takes a lot of horsepower to push that many pixels to the screen, and more power means more battery consumption. So the case for 'retina display' still needs to be made.
The BOM (Bill of materials) doesn't make sense. It's estimated that the BOM for the iPhone 4S is nearly $200, but an unlocked, unsubsidized handset will set you back a whopping $649. Apple is not in the razor-thin margins business. Apple might be able to strongarm carriers into carrying the iPad as a contract line item and be able to sell them cheaper, but the iPad sells well as it is without contracts and such.
Why does Apple need to engage in such aggressive price cuts? It's already selling iPads as fast as it can make them and there's no serious competitor in sight. A price cut would only put more (unnecessary) demands on the supply chain. So again, where's the incentive.
Apple is not known for such aggressive price cuts. The company knows that once a price drops, there's no way to push them back up.
Kindle Fire isn't that much of a threat to the iPad. The Kindle Fire sure is a threat, but it's a threat to other Android tablets and not the iPad. Unless we see a dramatic showdown in iPad sales over the coming quarter there's no need for Apple to do anything drastic.
So, am I expecting a $299 iPad 3. No, I'm not, and neither should you.