Apple is likely to announce the iPad 5 and iPad mini 2 at some point during 2012, and when it does there is a large potential for Apple to expand its product line, offering more choice to consumers and competing with the competition on price.
The latest rumors suggest that the iPad mini 2 with Retina Display could cost Apple $12 more to manufacture than the iPad mini on store shelves today, which has led some to believe that Apple will break rank and increase the price of an iOS device to put a Retina Display in the 7.9-inch iPad mini.
While Apple does charge a premium for the Retina Display on the MacBook Pro (a price it just dropped by $200), consumers are more demanding of higher resolution displays on their smartphones and tablets than on their notebooks. Apple could charge more for an iPad mini 2 with Retina Display, but there are several reasons why it makes more sense for Apple to keep the cost of the iPad mini 2 at $329.
The iPad mini’s gross margins are “significantly” lower than on other Apple mobile devices according to Apple CFO Peter Oppenheimer, though at an estimated 43% they appear higher than much of the Appel product line as of late 2012. The cost to make the iPad mini may go down as the gross margins go up this year, based on Oppenheimer’s comments which show Apple is fine tuning the supply chain and manufacturing process.
Combined with iPad 5 release date rumors for the fall and hints that the iPad mini 2 with Retina Display won’t arrive any sooner, Apple likely has several months to bring down costs of the iPad mini and for the potential iPad mini 2.
When Apple announces new versions of the iPhone and iPad the older models may see new life as a cheaper option. The iPhone 4, iPhone 4S and iPad 2 are prime examples of how Apple is able to cover multiple price points, including cheaper prices, without setting out to build cheap products. While the iPad 3 doesn’t fit this strategy, it is the exception, rather than the rule.
Potential Apple 2013 Product Lineup
Based on the rumors of a fall iPad refresh and Apple’s past methods of offering a cheaper product, this is what Apple’s product iPad product lineup could look like for the 2013 holiday shopping season.
- iPad 5 (5th Generation with Retina Display) – $499 starting
- iPad 4 (4th Generation with Retina Display) – $399 starting
- iPad mini 2 (42nd Generation with Retina Display) - $329 starting
- iPad mini (1st generation) – $249
In this vision the iPad 2 disappears from Apple’s lineup rather than dropping down to a $299 price point.
With this lineup, Apple is able to offer a tablet that competes on price with most Android tablets on the market, as well as with Windows 8 and Windows RT tablets occupying the upper tier.
Why Apple’s iPad Lineup Will Change
There are several reasons Apple is likely to change the iPad lineup for 2013. External forces like price and competition are present, but Apple doesn’t always react to those pressures. The bigger reasons Apple may adopt this new lineup are internal to the company.
This move would push the iPad and iPad mini all over to the new Lightning connection, a connection Apple has more control over, and allow more focus on the new connection type. Apple would still sell at least one iPhone model with the 30-pin dock, but this would streamline the iPad.
Apple will likely announce iOS 7 at WWDC 2013 this summer and it is almost certainly the version of iOS that would ship on an iPad 5 and an iPad mini 2 later this year.
With iOS 6 Apple dropped support for the iPad 1, and with iOS 7 it is possible that Apple will drop support for the iPad 2. The iPad 2 is already missing support for Siri and it’s easy to imagine that Apple could cut out support for the iPad 2 with the release of iOS 7.
This move would also make Siri a standard feature on all iPads with iOS 7.
When asked about cheaper products at the Goldman Sach’s Technology Conference earlier this month Tim Cook explained how Apple drives down the price of products to compete with lower cost devices.
Also, if you look back at Apple’s history, what you would see is, you take something like an iPod. When we came out with iPod, it was $399. Where’s iPod today? Today you can go out and buy an iPod shuffle for $49. And so instead of saying “How can we cheapen this iPod to get it lower?”, we said “How can we do a great product?”, and we were able to do that at a cost that enabled us to sell it at a very low price of $49 and appeal to a lot more people.
As Cook explains, Apple is able to cut prices down without the need to go after a a cheaper product. By following this philosophy, Apple can bring the iPad mini price down further to compete with the Nexus 7 and Kindle Fire HD on price.
iPad 5 and iPad mini 2 Rumors
We’ve heard numerous rumors that Apple is planning an iPad 5 and an iPad mini 2 for later in 2013. Some rumors point to a Spring release, but recently sources suggest Apple will need to push the iPad 5 launch and iPad mini 2 launch to later in the year. The iPad 5 is rumored to get an upgraded design (similar to the mock up above from Martin Hajek) that looks much like the iPad mini and includes the lightning connector. The iPad mini 2 is said to get a Retina Display, which is something that many users would love to see.