Apple's iPad Mini plunge

Apple is almost ready to dip its feet into the 7-inch tablet space and the iPad Mini, or whatever moniker the company decides to put on the device, is about to enter a crowded pool already inhabited by the likes of Google and Amazon.

That's not to say that the tech giant will necessary have to play second fiddle to the existing players, but this must be a rather unfamiliar feeling for Apple, which has usually been one step ahead of the competition. The iPad may not have been the first tablet computer but like the iPhone it set the bar for what consumers expected a tablet to deliver. Can the iPad Mini repeat the feat?

A year since the demise of Apple's founder Steve Jobs the release of the iPad Mini has been labelled by some as Apple boss Tim Cook finally exorcising the legacy of Jobs. After all Jobs had famously labelled the form factor “dead on arrival” but then again he also said that 3.5 inches was the "sweet spot" for smartphones. The adjustments to the iPhone 5 and now the release of a 7-inch tablet indicate that Apple under Tim Cook isn't going to be shackled by the dictums of its legendary founder, and this motivation has less to do with Cook stamping his own identity and more to do with market realities.

The 7-inch tablet space is running hot - sales of Google's Nexus 7 are set to tick over eight million units by the end  of this year, while Amazon's Kindle Fire HD is also a bona fide bestseller in the US.  Faced with this reality, Apple doesn't have a choice but to enter the market. There is little doubt that there is a market for different form factors and there is no reason why a 7.85 inch tablet doesn't make sense for Apple. The real question is the iPad Mini's price tag and how far Apple is willing to push the envelope with prices.

Amazon boss Jeff Bezos recently told the BBC that the Kindle Fire HD and Paperwhite sales don't deliver any direct profit to Amazon because the hardware is being sold on cost. It's the same story at Google, which is selling the Nexus 7 at cost and is absorbing the associated marketing expenses. It's a strategy that has long been an anathema for Apple and it is unlikely to break the mould with the iPad Mini.

While the latest consensus is settling around the $US250 mark, just touch higher than the $US200 price point for the Nexus 7 and the Kindle Fire HD, there is a good chance that the iPad Mini will cost a little more.

According to 9 to 5 Mac, the iPad mini could cost as much as $US329, which means that Apple will probably price the base model somewhere between $US250 and $300 and will have a souped up version on offer as well.

Asymco's Horace Dediu reckons the starting point will be around the $US250 mark for an 8 Gb WiFi only model with increases of $US100 for each doubling of capacity and $US130 for the addition of cellular chipsets.      

If Dediu's hypothesis holds then here's how the iPad Mini could sit in the overall iOS price portfolio.

Apple devotee and the head of Melbourne-based app developer Outware Mobile, Danny Gorog, reckons that Apple's strong app ecosystem will be a key motivator for buyers who will be willing to pay extra for the iPad Mini.

“They just have a huge ecosystem of apps and customers will justify paying the extra dollars because they trust the Apple brand and recognise the strength of the App store,” he said.

Gorog adds that there is also an issue of reuse of technology which will help keep Apple keep its costs down.

“Apple will reuse a lots of technology, so they have already ridden the cost curve for the iPad Mini. The device is reportedly not expected to have the retina display, Apple will most likely use the A5 processor that it has been running on the iPad 2 , and it has the tools and the equipment to produce slim cases. So it has a lot of things in place already,” Gorog says.

Another issue that has caused plenty of debate is how far Apple is willing to let the iPad Mini cannibalise the market for iPad. Cannibalisation is a sensitive issue for any business but Apple probably won't be losing too much sleep over it. For one thing Apple has usually been pretty comfortable cannibalising its own sales, a la the iPhone knocking the iPod, and more importantly it would much rather have the iPad Mini cannibalise the iPad rather than Google or Amazon steal the show.

Despite the talk about Apple losing its innovation mojo, and there is some justification for this thinking, the tech giant is almost certain to unveil a highly mature offering, which is invariably destined to become a Christmas bestseller. Apple has the supply channels, the retail channels and the brand equity to potentially arrest the initiative shown so far by Google and Amazon, presenting the iPad Mini as the premium 7-inch tablet.