Production rumors out of Asia indicate that suppliers have received orders to produce components for 6 million Mini iPad units, to be released in the third quarter of 2012. But will a 7-inch Mini iPad’s top competitors in the marketplace be the New iPad and iPhone 5?
Mini iPad rumors persist, with more whispering coming out of Asia that the tech manufacturing sector is receiving component orders for 6 million units, with a release window sometime in the third quarter. The Chinese-language tech blog Netease, which covers production-related news and rumors for consumer tech, had this to say (via Google Translate): “the appearance of the chassis are arranged by the Hon Hai Group, the new co-operation in some parts partners. In addition to the previous markets confirmed AUO and Shuo Following the New iPad this year, has re-received the iPad Mini Order,” going on to say that, “according to Taiwan media reports, the recent market came iPad Mini supply chain has been finalized, with the exception of David overseas, and the master also won the assembly order.”
Netease appears to be drawing from sources from within the tech manufacturing sector. But for as much as the article points out specific component suppliers purported to have received orders for Mini iPad parts, the sources remain unfounded.
But I found another quote from the Netease article that is worth thinking about:
They also had this to say about the viability of a 7-inch Mini iPad in the consumer tech marketplace: “However, foreign analysts pointed out that if Apple launched a low price the iPad Mini, most affected is probably the market share of more than 60 percent of the iPad, and may generate crowding out effect size similar to the iPhone.” Broken English and yet another unfounded source aside, this is an important consideration: what could the unintended consquences be of releasing the Mini iPad, and could it lead to reduced sales of this year’s New iPad and eventual iPhone 5?
Joanna Stern at ABC News is quick to point out that Steve Jobs was never a fan of the smaller iPad. she had this to say in a recent article:
Steve Jobs had been quite outspoken about smaller tablets; during one earnings call he even said that a 7-inch tablet would be “dead on arrival.” On that same call he said, “While one could increase the resolution of the display to make up for some of the difference, it is meaningless unless your tablet also includes sandpaper so that the user can sand down their fingers to around one quarter of their present size.”
Jobs’ explanation for why the smaller iPad would be a problem doesn’t include any discussion of how it could affect sales of other Apple devices, or if it could be profitable in an of itself. Though Jobs was also known to have said more than once that the smaller tablet (or large-screened smartphone) can be confounding to consumers, since it strattles both the smartphone and tablet design. As a result, Jobs seemed to be implicitly suggesting that a device like this could in fact hurt the iPhone and full-sized iPad.
In addition, there is even question as to whether or not a Mini iPad can in fact be a profitable product for Apple, based on what we know about the cost of components that go into the current iPads. Adrian Kingsley-Hughes at ZDNET has an interesting cost breakdown estimate of the Mini iPad, which bears out questions as to how Apple would ever make any money selling it:
“[T]ake a look at the cost of a 16GB Wi-Fi iPad 2 [graphic above]. It’s down as a shade over $245. We can take this as a starting price for the mini iPad. A smaller iPad would have a smaller screen, smaller touch screen and, one would assume, a smaller battery. But how much realistically can these smaller items shave off the price? Even shaving $40 off the overall bill of materials (BOM) and manufacturing costs would mean that even at $299 the mini iPad would have the smallest gap between BOM plus manufacturing costs of any iPad. It just doesn’t make sense that Apple would release a mini iPad, a device that could potentially cannibalize sales of the more expensive models, at such a poor margins. A mini iPad might make sense if iPad sales were flagging, but there’s nothing to suggest that Apple is having a problem selling full-sized (and high-margin) iPads.
We already know that, thanks to Apple keeping the new iPad prices steady, it isn’t particularly profitable on its own — Apple’s profits from the iPad come mostly from brute sales numbers. Now, the Mini iPad appears to be even less profitable at the unit level. But as Kingsley-Hughes points out, it could end up cannibalizing sales of the iPhone 5 and New iPad. Of course, Kingsley-Hughes’ computations are based on the rumor that the Mini iPad would essentially be exactly like the iPad 3, only smaller. It remains to be seen if Apple would be willing to make the Mini iPad an el cheap-o model in order to make it more profitable. It is, after all, possible to make much lower-performance tablets than what Apple produces. But what would possibly come with it is a drop in quality and performance that Apple customers may not be comfortable with. As Apple enthusiasts, its much easier to imagine the viability of new products like the Mini iPad based on our own wants and wishes than to be sober enough to ask, “will it make Apple money?” If the answer to this question is “no,” then there is no way that we’ll ever see a Mini iPad. They might have a couple promotypes sitting around in the Cupertino labs, but that’s where they’ll be destined to stay.
By Michael Nace