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Apple 'too late to the 7in tablet market', but 10 million iPad mini sales by Christmas
- — 03 October, 2012 18:11
Further to claims that Apple will announce an iPad mini next week, with the device shipping the following week, a report has appeared claiming that Apple's component suppliers have started mass production of the new tablet, but an analyst thinks that the company is too late to make an imprint on the 7in tablet market.
The Wall Street Journal claims that two of its sources confirmed that production of the iPad mini has begun.
A Barclays analyst believes that Apple is ramping up to sell nine to ten million iPad mini units before the end of the year. According to Barclays analyst Kirk Yang, Apple is using Hon Hai Precision Industry (Foxconn) and Pegatron to produce the iPad mini. Where Hon Hai is expected to ship six to seven million iPad minis in the run up to Christmas, Pegatron is expected to ship three million iPad minis in the fourth quarter of 2012 - less than had been hoped.
Yang suggested production of iPad minis had been delayed due to component supply constraints.
"Unlike Hon Hai Precision Industry, Pegatron lacks the experience for tablet assembly, which has a long learning curve," Yang wrote in a note to investors.
Despite the issues with tablet assembly, Yang believes Apple will launch the iPad mini in October. Yang wrote: "As most iPad component vendors ramp up shipments in September that would continue into the fourth quarter of 2012, we do not see any signs of a postponed shipment schedule, suggesting an on-time October product launch."
However, another analyst is suggesting that even an October launch may be too late.
Analyst Rob Enderle told Sci-tech today: "Any way you look at it, Apple is either months or almost a year late to the market with this."
Along with noting that Apple is late to market with this form factor, Enderle suggested that it may struggle to compete with the already established, and cheaper, devices. "The Kindle Fire was the tablet that really got people looking at the sevens to begin with, followed by the Nexus 7."
Rumors have suggested a $250 (£155) price for the iPad Mini, this is more than other 7in tablets.
"I don't see Apple's angle here, which I think is a problem," he said, noting: "They have to maintain margins so they can't beat them on price. The screen on both the Nexus 7 and the Kindle Fire are very good, so they can't really beat them on screens."
Another issue: people use 7in tablets in a different way to 10in tablets like the iPad. Can Apple provide the kind of content 7in tablet users want? "The 7in tablets are all about content - books and movies. Unlike the 10in class of tablets, where people expect to do productivity tasks on the device, the 7in is just for consumption."
While Apple has an already established App Store and iBookstore, Enderle doesn't think that will be enough. "The killer apps are pretty much already on the Kindle and the Nexus 7, which is going to make it much tougher for Apple to break in," he said.
And it's not just the Kindle and Nexus that Apple will be competing with. "Apple could cannibalize its larger iPad sales with what is a smaller revenue product and that doesn't work out for them, either. There are a lot of ways this could go wrong," Enderle said.
The questions are whether Apple will price the mini iPad aggressively enough to compete with Amazon's Kindle HD and Google's Nexus 7, and if, in so doing it cannibalizes sales of its larger iPad. If the iPad is sold at a lower price, would that hurt Apple's profit margin?
Another analyst is less negative. Daiwa Capital Markets analyst Christine Wang believes a smaller tablet could help Apple broaden its product portfolio and stay competitive in the increasingly crowded market. She expects Apple's iPad mini to sell for a lower prices than the current iPad and believes it will appeal to consumers who find the current iPad too heavy or too expensive. "Many people use the iPad to play games and watch videos, but they cannot hold it with one hand," Wang told the Wall Street Journal.