Why It Makes Sense For Apple To Build A Smaller iPad

tablet sales

The rumour mill has kicked into high gear after Bloomberg reported last week that Apple will release a smaller iPad by the end of this year to compete with Amazon’s Kindle Fire and the new Google Nexus 7.In a news note out today from BI Intelligence, we break down the reasons why Apple should make a smaller iPad — and also analyse the counterarguments against.

To see the full news note, sign up for a free trial subscription to BI Intelligence today→ 

Why Now?

BI Intelligence believes Apple may have leaked the rumours now in order to freeze the market, hoping that consumers would hold off on buying the Nexus 7 or next Kindle Fire to wait for Apple’s offering instead. 

The arguments for an iPad mini:

  • Proven demand: Mid-sized devices like Amazon’s Kindle Fire and Samsung’s Galaxy Note are selling well, and Google’s Nexus 7 is getting great reviews. 
  • Content consumption and remote control. It would fill a niche between the iPhone and iPod Touch, whose small screens are not suited for long reading sessions, and the iPad, whose power and content creation capabilities may be more than some consumers are willing to pay for. It could also serve as a better remote control for the long-rumoured Apple iTV.
  • Preventing disruption: Apple has two choices: cede this low-end market to keep its profit margins high, or compete to maintain its dominance. 

The arguments against an iPad mini:

  • Steve Jobs didn’t like them: On an earnings call in 2010, Apple’s Steve Jobs denigrated 7-inch tablets as “tweeners” that would not be significantly additive to the smartphones most users are already carrying.
  • Fragmentation: Adding another screen size would be a first step toward the kind of fragmentation that’s plagued Android devices and made development complicated. 
  • Lower margins: Apple has huge margins on the current iPad — estimates put them over 50%. A competitively priced ($199) iPad mini could not achieve those margins. 

However, these arguments all have holes. The evidence and business analysis favours a smaller iPad. Platform Wars:

Apple’s move into smaller tablets affects the mobile platform wars that BI Intelligence covers extensively. In our Who Will Win The Mobile Platform Wars? report, we explain why it is still a two-horse race between iOS and Amazon (that iOS is winning) and how Amazon is doing surprisingly well. Our Android: A Platform In Transition report highlights Android’s market opportunity, its position in the market, and its weaknesses as a platform, and how Google’s mobile announcements at the recent I/O conference play into the landscape.

To access the full news note, as well as our full library of research, charts and data, sign up for a free trial of BI Intelligence today.→

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