A smaller-screen iPad could disrupt tablet market

Apple would rather see its iPads dominate the market instead of leaving open an avenue for Android to take away market share, one analyst said

An Apple iPad with a smaller screen, if released, could create tough decisions for buyers and slow the momentum of the current 9.7-in. iPad and a number of Android devices with 7-in. and 8-in. screens, analysts said on Thursday.

Speculation around Apple's plans to launch an iPad with a smaller screen than its current 9.7-inch display gained steam this week, with The Wall Street Journal reporting that Apple's component suppliers were preparing to produce such a device starting in September.

The story, which cites sources familiar with the situation, did not provide specific details about the tablet, but said the screens would be manufactured by LG Display and AU Optronics. A separate story by Bloomberg reported the product would launch in mid-October.

If such an iPad is released, it would enter a crowded market of small-screen tablets that include Google's recently released Nexus 7, which has a 7-inch screen and was announced last week, and Amazon's Kindle Fire, which was announced last year and has an 8-inch screen. The Fire and Nexus 7 run versions of Google's Android OS.

Analysts said some who already have an iPad may buy a smaller one, but new buyers won't purchase both and instead will decide what they want based on price, portability and usability. Consumers may buy the smaller iPad for use as an e-reader and to access media content if it is priced at roughly $200 to $300, analysts said.

Apple launched the iPad in 2010 and the company originally dismissed the idea of a 7-inch tablet because of the small screen size, but things may have changed after the release of the Fire, which was relatively successful, and the Nexus 7, said Frank Gillett, analyst at Forrester Research.

"Having something you can hold in one hand seems to matter to some people and may matter in emerging markets," Gillett said, adding that the lower pricing on competitive tablets may have also changed Apple's position.

Apple is not afraid of disrupting its own products and the company will chase an opportunity if it sees a different value proposition, Gillett said. Apple would rather see the iPads dominate the market instead of leaving open an avenue for Android to take away market share.

Analyst firm IDC has predicted Apple's grip on the tablet market will grow if an iPad with a smaller screen is released this year. In June, IDC said it expected 107.4 million tablets to ship this year, with the numbers growing to 142.8 million units next year.

A $199-to-$299 price range would be attractive to buyers, analysts said. A lower price may create an attractive entry point into Apple's iOS devices, but functionality will also matter in purchasing decisions.

The smaller-screen iPad would be highly portable and fit between Apple's iPhone and 9.7-inch iPad, said Roger Kay, principal analyst at Endpoint Technologies Associates.

"It may be more portable than the 9.7-inch [iPad], and it may have more functionality than the iPhone," Kay said.

Users may prefer the portability of a smaller-screen iPad, especially those who use the iPhone for a lot of work, Kay said. However, watching a movie or gaming would be better on a larger-screen iPad with the high-resolution Retina display, Kay said.

"It's a test on how form factors will play out and what models users need for work and play," Kay said.

Using a smaller-screen tablet may be better for reading e-books or using custom applications designed for the display size, said David Daoud, research director at IDC. But it could also be stressful on the eyes in some cases, like when playing games or watching a high-definition movie, Daoud said.

A smaller-screen iPad would be attractive to students and also fit well in schools and universities, Daoud said. Apple earlier this year started offering iBooks 2, a tablet application that brings multimedia textbooks to students.

Decisions about which tablet to buy will also be tied to mobile broadband contracts with carriers, Daoud said. It remains to be seen if Apple will be able to sell both iPads to users who have 3G or 4G subscriptions, which are usually tied to specific devices.

Analysts said that Google and Amazon are selling tablets at a loss in an effort to promote their entertainment, application and cloud services, and Apple usually makes profits off its hardware. The company won't get into a pricing battle with Android devices, analysts said.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

Copyright © 2012 IDG Communications, Inc.

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