Will Apple Launch A 7 Inch iPad?

Ahead of the expected March launch of the iPad 3, Computerworld have run a story that Ezra Gottheil (a respected analyst with Technology Business Research) has predicted Apple will also roll out a new 7 inch iPad later this year:

I believe that’s always been in the plan” said Gottheil of a small iPad, contradicting past comments by Steve Jobs, who had rejected seven inches as too small for a tablet. “Actually that’s a good form factor for some users, and although they will also charge a premium above other similar-sized tablets, they want to protect that price flank.

Analysts predicting a 7 inch iPad are nothing new – this idea has been doing the rounds for a couple of years but has never come to fruition – and there are some very good reasons why not…

As I wrote last month, Apple’s standard (9.7 inch) iPads currently hold 58% of the global market share for all tablets – although 10% down from a year ago, the iPad is still the runaway market leader. Android tablets have increased to 39% market share but that is heavily segmented across hundreds of models and manufacturers at a bewildering range of price points.

Even allowing for further erosion of its market share, the tablet market size is still growing rapidly (260% in the last year) so the iPad will still represent a huge success story. Introducing a 7 inch version may only succeed in cannibalizing Apple’s existing share of the market – and with likely lower profit margins.

It would only make sense to invest in design, development and marketing of a 7 inch iPad if it made a positive overall contribution to the bottom line – and it is debatable how many Apple would have to sell to offset lost sales of the larger and more profitable iPad.

[Note: I have assumed a 7 inch iPad would have lower profit margins than the current iPad models – the price would have to be lower for a smaller screen (squeezing margins) because it would be competing directly with tablets like Amazon’s Kindle Fire, already priced almost as a loss leader. There is only so much of a price premium the market could stand for a similarly sized and specced tablet.]

Cut Price Competition

Gottheil’s argument about Apple wanting to protect ‘that price flank’ (i.e. that offered by cheap 7 inch tablets) is a strange one. In my recollection, Apple have never been keen to compete against cheaper rivals – Apple prices across all products actually create the top end of the market – reassuringly expensive to some, style over substance to others.

Apple don’t sell cheap iMacs just because Windows PCs with the same technology are half the price and they don’t sell cheap iPhones to match Android rivals so why should they race to compete for that price flank now?

7 Inch Form Factor

However, the one thing I do agree on with Gottheil is that Jobs was wrong about the 7 inch form factor. Like it or not, many tablets are frequently used for nothing more serious than reading ebooks, listening to music, watching videos and updating social networks – casual activities where weight and portability can be more important than a larger screen size in a heavy casing.

Anyone who has tried reading an ebook on a 600g iPad will know that it is (literally) very heavy going compared to a cheap 7 inch tablet like the M009S (reviewed here) which weighs only 365g. The larger form factor can also prove more difficult to hold one handed – perhaps more suited to the original concept of a tablet computer than the common usage today as a basic multimedia and web browsing device.

This is the one reason why I think Apple may indeed be working on a 7 inch iPad – because there is still a gap in the market for a high quality and expensive 7 inch tablet. Despite the initial success of the Kindle Fire (not even available yet in some markets like the UK), it doesn’t tick all the boxes – too proprietary for some and not Apple enough for others…

If Apple could produce a 7 inch iPad at a realistic price (around $350) I still think those profits could outweigh the impact of lost larger screen iPad sales.

What do you think, will they or won’t they? Have your say in the comments below.