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The iPad Mini's Pesky Pricing Predicament

The iPad Mini's Pesky Pricing Predicament

Apple's rumored to be working on a miniature version of the iPad to answer Google's Nexus 7 and Amazon's Kindle Fire. Both of those tablets sell for $200, and that price doesn't likely give either manufacturer much, if any, profit margin. At Apple, though, margin is usually a very high priority. How much, then, could Apple be expected to charge if an iPad Mini becomes a reality?

By Richard Adhikari MacNewsWorld ECT News Network
07/09/12 11:49 AM PT

Excitement continues to ramp up around Apple's reported plans to launch a miniature iPad, spurred on by the new Google Nexus 7 tablet and rumors of an Amazon Kindle Fire refresh.

Meanwhile, speculation continues regarding what price Apple might charge for a smaller iPad.

Will Apple price the so-called iPad Mini at the same level as the competition, or will it command a higher MSRP?

Amazon's selling the Kindle Fire at US$200, and the Google Nexus 7 will be offered at $200 for an 8 GB version ($250 for the 16 GB version). However, it's been reported that both companies are taking a loss on their devices in order to gain market share.

"I wouldn't say it's impossible, but I think it's extremely unlikely [that Apple would] go the route that Google and Amazon have gone," Rhoda Alexander, a director at IHS iSuppli, told MacNewsWorld. "The profit margin is key to them continuing to develop the ecosystem on the product."

"I see no reason in the world why Apple would feel it had to match anybody's price," Danielle Levitas, a vice president at IDC, told MacNewsWorld. "Given its price for the low-end generation-two iPad is $400, a $300 price point seems about right for me. I don't know what that would do for Apple's margins, but $300 is about right for a premium over the competition, and from the absolute dollar standpoint."

It's possible that Apple might peg an iPad Mini at $250 or $280, "but the $300 price point makes sense when you arc it across all the products from iPods to tablets," Alexander said. ""Especially with the old 9-inch product at $400 and the new one at $500, this would be right in line."

Possible Specs for the iPad Mini

There is some dispute over whether or not the iPad Mini will have the same expensive Retina Display as the iPhone 4S and the new iPad. Further, one report claims Apple will ship the iPad Mini with 8 GB of internal storage to hold down costs. Rumors peg the device's price at about $250.

"Obviously nobody knows what hardware elements would be included with it," iSuppli's Alexander said. "It's possible Apple could go with a $250 WiFi version and a $350 [cellular] wireless version, but they might be leaving money on the table."

Apple's "already got a product out there that's very profitable for them that they continue to develop on," Alexander pointed out. "They'd be cutting off their nose to offer a stripped-down, no-profit version [in the iPad Mini]."

Apple continued to dominate the tablet PC field in Q1 2012, with nearly 63 percent of the worldwide market, according to NPD DisplaySearch. The company also had over 22 percent of the worldwide mobile PC market, nearly twice second-place HP's share of the 76.2 million-unit market.

What About the Competition?

If Apple does launch an iPad Mini, a prime motivator will likely be to "have an answer for Google and Amazon in the 7-inch tablet space, and that's definitely a piece of it, where if you let that gap with the competition get too big, it becomes a problem," iSuppli's Alexander said.

However, "the bigger issue is having a smaller footprint where people want a smaller version for mobility, and particularly in the Asian market, where people want a smaller product," Alexander stated.

Google and Amazon might respond by focusing on services and content, IDC's Levitas suggested. "Both Google and Amazon have done a good job in delivering content, and in some ways the Nexus 7 is a little better than the Kindle Fire."

However, Google "can do some real competitive damage if they really get their act together with Chrome plus Google Drive, if it lets me have consistent experiences across all our screens, and it's well-marketed," Levitas surmised. "Google is not real good at marketing, they rely on the technorati to educate the masses."


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