Analyst: Half of iPad Mini sales will be cannibalizations

Using data disclosed in the Apple-Samsung case, expert predicts Mini sales will come at the expense of full-sized, and pricier, iPads

Apple's lower-priced iPad Mini will significantly cannibalize sales of the company's full-sized iPad, with up to half of customers opting for the smaller tablet, an analyst argued today.

Most experts have estimated the iPad Mini's cannibalization rate at between 10% and 20%, but Sameer Singh of Tech-Thought came up with a number around 50% after pulling sales data from the recent Apple-Samsung patent infringement court case.

Apple launched the 7.9-in. iPad Mini last week at prices starting at $349; the smaller tablet reaches retail on Friday, Nov. 2, when pre-orders will also be delivered.

The tablet is currently back-ordered two weeks for all configurations.

By Singh's calculation, the iPad Mini will have a cannibalization rate of 50% or higher. In other words, at least half of the iPad Mini sales will come at the expense of larger iPads as customers choose the less-expensive device.

He came to that conclusion by using sales data for the iPad 2 that was disclosed during the Apple-Samsung trial. That data, said Singh, indicated that the iPad 2, after it had been reduced to $399 at the March launch of the third-generation iPad, was not only the single-most-popular iPad model during the quarter, but that its cannibalization rate was most likely between 58% and 61%.

Singh spelled out his methodology in a post today on the Tech-Thought website.

"The cannibalization impact of the iPad 2 was primarily driven by the fact that it was priced $100 lower than the third-generation iPad," Singh wrote on that blog. "Now we have two levels of cannibalization, with an iPad Mini priced $70 lower than the iPad 2 and $170 lower than the fourth-generation iPad. Based on [those] points, even though the iPad Mini is a smaller tablet, the cannibalization impact is unlikely to be far lower than it was for the iPad 2. [So] I would expect the iPad Mini to cannibalize at least 50% of iPad sales ... for every 5 million iPad Minis sold, Apple would lose at least 2.5 million [larger] iPad buyers."

Although Singh's prediction of iPad Mini cannibalization can't be checked until January, when Apple releases sales figures for the last three months of 2012, the boom in iPad 2 sales that he used as a precondition can be by looking at the ASP, or "average sales price," of iPads overall.

In the first quarter of this year -- Apple cut the iPad 2 price to $399 on March 7, three weeks before that quarter's end -- the iPad ASP dropped to $559 from the previous period's $593, hinting at a surge in sales of that model. The iPad ASP fell even further, to $538, in the second quarter, when the cheaper iPad 2 was available the entire quarter. And during the third quarter, the ASP remained flat at $535.

"After the iPad 3 launch, the ASP fell quite dramatically and stabilized in the following quarter," said Singh in an email reply to questions. "This strongly suggests that iPad 2 cannibalization was considerably high -- enough to knock the iPad's ASP by ~$100 -- taking cyclicality into account."

Singh's comment about a $100 plunge in the ASP referred to a comparison between the third quarters of 2011 and 2012: The iPad ASP in the former was $617, or $82 more than a year later.

The importance of cannibalization is that by selling more iPad Minis at lower prices than full-fledged iPads, Apple may be gaining users but it's losing revenue. The assumption, of course, is that buyers of the iPad Mini, sans such a tablet, would have instead purchased a higher-priced iPad, which generates both more revenue for Apple and more profit.

Singh came up with a rough estimate of a fourth-quarter ASP, making several assumptions along the way, including total iPad sales during the period of 22 million.

"The net average ASP could come down near ~$500-$510, possibly lower," said Singh, also noting that his back-of-the-envelope forecast pegged the iPad Mini-only ASP at between $400 and $410, with that higher-than-$329 number resulting from some buyers choosing the more expensive storage configurations or the Wi-Fi + cellular models.

In an earnings call with Wall Street analysts last week, Apple hinted that it expects a large number of customers to pick the iPad Mini over the full-priced iPad, saying that it anticipates gross margins to slip in the fourth quarter.

"At a starting price of $329, the iPad Mini's gross margins should be safely above 30%, although lower than other iPads," said Singh.

Singh saw the move as part of Apple's strategy to cut off sales of smaller, cheaper tablets sold by Amazon and Google, even though to do so it's accepting lower margins and some serious cannibalization. "[But] it seems like a defensive strategy, in response to the heightened competition in the 7-in. space," said Singh.

The numbers, Singh argued, don't lie: Apple may portray itself as a premium brand, with customers willing to pay whatever the company charges, but the fact is that they're price sensitive, too.

"iPad buyers in general are quite brand conscious.... It would be fair to say that they're more concerned with the brand/ecosystem as opposed to the product specifications/features," Singh said. "[But] with the iPad 2 and iPad Mini, the brand and ecosystem cease to be a factor. What the data seems to suggest is that iPad buyers are quite price sensitive, as long as brand or ecosystem is not a factor."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is

See more by Gregg Keizer on

Read more about tablets in Computerworld's Tablets Topic Center.

Join the PC World newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags Applehardware systemsMacintoshtablets

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Gregg Keizer

Computerworld (US)
Show Comments

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Armand Abogado

HP OfficeJet 250 Mobile Printer

Wireless printing from my iPhone was also a handy feature, the whole experience was quick and seamless with no setup requirements - accessed through the default iOS printing menu options.

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?