WSJ, Bloomberg confirm Apple's 7.85-inch 'iPad mini' plan

Apple [AAPL] doesn’t presently offer a 7-inch iPad, but this may change. Bloomberg has recycled another of the iPad rumors that have been in circulation in recent months and now cites its shadowy “sources” who seem to think the company intends introduction of a small size iPad at a deeply competitive price. And this morning's Wall Street Journal also confirms production of the new device has begun.

iPad.jpg

[ABOVE: Steve Jobs introducing the original iPad, back in the day.]

7-inches is no waste

Bloomberg believes the 7.8-inch iPad will feature a 1,024-x-768 display. This follows comments earlier in the month from Pacific Crest analyst, Andy Hargreaves, who also predicted a 7.8-inch iPad this Fall.

We anticipate an entry-level 7.85-inch iPad with 8GB of NAND capacity to price at $299 with an initial gross margin of 31 per cent. We estimate Apple will sell 10 million 7.85-inch iPads in FQ1 (Dec. 2012) and 35.2 million in all F2013. Based on estimated component order volume, we believe our iPad mini unit estimates are well within Apple’s production capacity,” he wrote.

This morning's Wall Street Journal confirms production of the new iPad has begun, citing sources who claim Apple is working with display manufacturers including LG and AU Optronics.

There’s certainly competitive reasons for Apple to do introduce a product like this. If you’ve been keeping up with this movie, you’ll already know of the Amazon Fire and Google Nexus 7 (7-inch) tablets, which are apparently chopping away at the tablet market low-end. Given the antagonistic hostility between Apple and the multi-headed hydra which constitutes the Android army, it seems unlikely Cupertino wants to give its enemies free reign in the space.

You shouldn’t be fooled when they say it’s only how you use it that matters: at the end of the day, size is everything. Apple has previously dismissed 7-inch iPad variants as being too small for proper use. Speaking in 2010, Apple co-founder, Steve Jobs, famously said: “The 7-inch tablets are tweeners: too big to compete with a smartphone, and too small to compete with an iPad. They are going to be DOA.

Changing targets

Consider this: Apple’s original decision to favor a 10-inch device was prescient because at that time the true targets of the mobile device/PC hybrid were netbooks and PCs. The iPad succeeded in stifling growth in the netbook market and the device continues to cannibalize the market for second PCs and portable systems. This has helped the company cling onto c.61 percent of the so-called ‘tablet’ market, which is, of course, really an iPad market.

That latter point’s not simply facetious, it’s important: Apple sees this as an iPad market and there’s no doubt it sees the succcess of the Android-powered Amazon Fire as a challenge to its fiefdom.

The heavily-subsidized Amazon Fire is attractive to many cash-strapped consumers. While it lacks the finesse, design and product build quality of an iPad, it’s a budget tablet for people who just want to consume content: read books, play music, watch a few movies or check the Web and/or email. Google hopes its newly-introduced Nexus 7 will appeal to the same congregation.

Apple doesn’t usually introduce products just because there’s a competitive business case for doing so. It prefers to enter business sectors in which it can add a little spice:

"Steve grilled in all of us, over many years, that the company should revolve around great products, and that we should stay extremely focused on few things. Rather than try to do so many that we did nothing well. And that we should only go into market where we can make a significant contribution to society, not just sell a lot of products in a market,” said Apple CEO, Tim Cook way back in February.

Cook also spoke up for the company’s evolutionary approach to mobile device design, pointing out that the iPad has been a success because it “stands on the shoulders” of what went before it: iTunes, the App Store, the iPhone and the iPod, for example. Given that you can now add the iBookstore, iTunes Match and iCloud to this mix, then perhaps the time is indeed right for new families of portable device. And perhaps iCloud 2.0 can add that little extra contribution.

Wishful thinking?

Of course, speculation Apple intends launching a 7-inch iPad may be nothing more than wishful thinking. Should the company ship such a device, then who might want it? Here’s a few ideas.

-- Budget conscious consumers
-- Educators, parents and children
-- Those looking for an easy-to-hold eBook reader
-- Some enterprise customers
-- Retailers looking to adopt iPads as part of their NFC roll-outs

The speculation isn’t new. It has been around for months. In May, Digitimes (via BGR) claimed Pegatron Technology had begun receiving orders for the new iPhone and a 7-inch iPad. A previous report in March cited an anonymous Samsung source who told The Korea Times that Apple intends launching a smaller ‘iPad mini’ later this year. These are just two of a series of similar claims extending back into last year.

A second May report from iMore cited a “reputable source” who also confirmed a 7-inch iPad scheduled for October release with a price set between $200-$250 -- low enough to cause competitors genuine pain.

Shaw Wu of Sterne Agee says: "We have picked up evidence since 2009 of Apple working with smaller, as well as larger screens ranging from 4-inches to 12-inches that could be used in a future iPad, iPod touch, and/or iPhone or even MacBook. We do not sense that the release of an iPad mini is imminent and quite frankly, exact timing is difficult to predict. However, we do believe it makes both fundamental and strategic sense for Apple to address at some point."

However, most of the self-appointed great and good of the Mac rumor Web condemn Digitimes as being the deeply inaccurate source it often is. This means you should take its claims with a huge pinch of salt -- but not all its claims turn out false.

Competing on price

Given that many of its components could be identical to those used inside existing iPhone and iPad models and that manufacturing will simply demand the introduction of a couple of new production lines at the company’s existing manufacturers, Apple should be able to introduce these things at prices others cannot match.

Both Google and Amazon are already subsidizing their 7-inch offerings as they attempt to grab a little share from the iPad market.

Ticonderoga Securities analyst Brian White last year suggested Apple would launch an “iPad mini” in 2012, priced at around $250-$299.

That price suggests the mythical 7-inch iPad mini from Apple could be a low-spec device marketed as a music, movie, ebook and communications solution. It could see Apple use up its stocks of A5 processors, rather than deploying the A5X of the current iPad crop. Unlikely to boast a Retina Display or LTE support, users would be able to explore the rich App Store catalog. The product may dent iPad sales slightly, but consumers who can afford it will still prefer the best in breed device.

With this in mind, analyst Shaw Wu told Bloomberg introduction of an iPad Mini: “...would be the competitors’ worst nightmare.

Right now it seems to me these nightmare’s are about to be realized, just before Christmas and introduced in tandem with the iPhone 5.

Though not everyone is convinced.

What do you think?

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