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Will You Buy a Cheaper iPad?

Reports of a scaled-down iPad with a 7.85-inch screen have been circulating widely just before the anticipated release of the iPad 3. There are a lot of implications, including the idea that {complink 379|Apple Inc.} will be churning out less expensive devices, despite the wage increases at {complink 2125|Foxconn Electronics Inc.} But for EBN's audience, the real questions are about supply, demand, and timing.

Let's recap the events:

The anticipated price point of the 7.85-inch iPad is $249 to $299, Digitimes reports. Apple is clearly trying to take share away from the low-cost tablets offered by Amazon.con and Barnes & Noble.

Apple already commands 60 percent of the tablet market, according to IHS iSuppli. Its biggest competitor in the fourth quarter of 2011 was itself — iPhones ate into iPad sales, IHS iSuppli says. (See: Smartphone Surge Heralds End of Tablet Era?)

What kind of demand would there be for a 7.85-inch iPad? I think that, left to its own devices (pun intended), the smaller tablet would be a huge seller. The third quarter is the ramp-up for holiday sales, and Amazon.com showed just how profitable good timing can be with the Kindle Fire. Anyone shying away from the high price of the iPad in 2011 could certainly justify waiting a year to spend $249.

But the biggest problem with this scenario is Apple itself. If, as expected, it releases the iPad 3 next week, what will this do to demand? If consumers follow their typical pattern, they'll line up immediately for the iPad 3. These consumers presumably would be people who do not own an iPad 2.

Or would they be? Apple “fanboys” will buy any Apple product at any time for any price.

Assuming Apple already controls 60 percent of the tablet market, it still needs to reach the other 40 percent. Is this group made up of people who own other tablets? Or do they own no tablet at all?

As a nonowner, my inclination is to wait for the cheaper iPad. Normally, I'd want the biggest screen possible, but the current iPad price is still too steep for me. There are advantages to a smaller tablet, including portability. I'd still have to drag it out at airports, along with my laptop. But that's another issue altogether.

There is still a possibility, though unlikely, that the iPad 3 will be smaller and sell for less than the iPad 2. But if that were the case, why bother with the $249 iPad at all?

And just to confuse matters further, Digitimes reports that Apple is also expected to release an 8GB iPad 2 for $349-$399, and that it has lowered the price of the 16GB iPad 2 to $449.

This is all good news for the component suppliers on Apple's vendor list. (See: Who’s on Apple’s Supplier List?)

Apple — which now has a market cap bigger than the GDP of some nations — is clearly ramping up production. Once a component is sold, whether to Apple or an EMS, suppliers book it as a sale. It is very difficult to return a product to a supplier, unless there is a clear defect.

For component suppliers not on the list, this could still be a boon. The events of 2011 have taught the supply chain that single sourcing is a dangerous game. Apple should always have at least two sources for the components it uses. If cost is a factor, suppliers should be looking to develop comparable, lower-cost parts to get a foot in Apple's door.

This will no doubt spur Amazon, B&N, and Samsung to provide even less expensive or differentiated tablets. If there is any downside to all of this, it's to Apple. How long can a company compete against itself? Is the iPhone the real threat to the iPad? I really don't know. I'll be holding on to my phone until my next upgrade comes along. But I'd like to ask those Apple fans out there what they think. Will you buy a cheaper iPad?

I probably will.

27 comments on “Will You Buy a Cheaper iPad?

  1. bolaji ojo
    March 1, 2012

    Would I buy a cheaper iPad? Many current Apple iPad users probably would if the form factor is different, that is, if it is smaller and can readily fit into a jacket pocket. But isn't the iPhone itself able to perform the same functions? Businesses might, though, and that is one set of buyers that Apple is targeting with a wide range of products.

    I have no intentions of buying an iPad just because of the price. I have looked at tablet PCs over the last year and haven't quite decided why I should add one to the electronic products I carry around. I have a Samsung smartphone that is bigger than the iPhone, a Blackberry and a laptop. Why do I need another device? I believe my Samsung Galaxy phone qualifies enough as a tablet PC.

  2. tioluwa
    March 1, 2012

    I might buy a cheaper iPAD if i don't have to pay through lower functionality, although i'm more of a nokia and android fan.

    I find the news that iPAD sales was eaten into by iPhone sales, that speaks volumes, as efficient smart phones are just as good as tablets, except for screen size.

    I think it all depends on the kind of customer: those who buy just for the fun or hype of it, and those who buy out of the need for such protable, smart devices.

    for the later, a cheaper iPad, might just not make any difference, but for the former, it could make a big difference.

     

  3. DataCrunch
    March 1, 2012

    Android devices and tablets are coming out in all different shapes and sizes, specifically by manufacturers like Samsung, HTC, Motorola, and now ZTE, among others.  It would make sense that Apple looks to provide additional form factors.  I think a smaller tablet would be a good seller.

  4. Wale Bakare
    March 1, 2012

    Thanks Barbara for the article. From consumer perspective bandwagon people would love to buy iPad for cheap price irrespective of features or additional functional parts. I bet you, normal ritual (queue) is likely to double by the time Apple launches its iPad 3

  5. Eldredge
    March 1, 2012

    @Barbara: I would consider purchasing the cheaper iPad – but I am in the population that currently doesn't have one at all. Your question seems ro be directed to current, larger iPad owners?

  6. Cryptoman
    March 1, 2012

     

    Price is certainly important for me when it comes to buying technology. However, I apply this rule differently for work and leisure.

    When I buy technology for leisure, I am very price conscious. I think twice before I decide to buy something that I will use to entertain and to use as a hobby every now and then. At least, I look for cheaper deals.

    However, my attitude for work related technologies is different. I do not bother with the price first. My first concern is 'will the product do what I want it to do?'. For example, I would not mind paying $2500-$3000 for a performance laptop that I will use everyday to work with as long as it does what I need it to do. Having said that I am not going to pay more than $3000 either because I know good enough alternatives do exist for less.

    Regarding a cheaper iPad, I certainly cannot see a place for it on my workbench. I really don't know see how I can make use of it. The best application I saw for it in my line of business was a digital oscilloscope. The concept was great: small measurement tool with little cable clutter and little real estate requirements on the desk. Unfortunately, the bandwidth of the iPad application was quite limited and therefore it remained quite basic in terms of the functionality it offered. Since I also don't need to impress any execs or clients in a meeting room by showing off with the most recent model of an iPad as I flick through the pages of a marketing/sales presentation either, I cannot think of how I can make it useful for my work.

    For leisure, I think I would buy a cheaper iPad. I don't need a huge RAM and a Quad processor for playing a few games, listening to music, browsing the web and watching videos etc. I don't even need a battery that will last for 10 hours. So why pay more?

     

     

  7. _hm
    March 1, 2012

    Cheaper may not be appropriate word to use. You may call it lower cost.

    But important point is not cost but many more new features including siri, better display, faster with longer battery life, thunderbolt and many more.

    100 million people will purchase it in 2012 if it is $249!

  8. Daniel
    March 1, 2012

    Barbara, I think most of the peoples may prefer IPad for a lesser feature. For them rather than features, the Apple brand matters lots, especially for those outside US. Some debates are going on whether I pad has to be offer in smaller screen dimension or not. The smaller screen size can reduce the pricing factor, but compatibility/resolution for the images and apps may get affect.

  9. Patrick_yu
    March 1, 2012

    Are you sure that 100M people will buy iPad if it is substantially lower priced?  To be honest, are you assuming there are readily available 100M people with a lot of disposable income whose #1 priority is to get entertained and to feel satisfied by merely the ownership of an iPad?  I hope that consumers worldwide eventually come to some sanity and truly understand the value of an iPad.  It is not a computer, it is not food and water.  Instead of pushing the iPad to young kids, parents should spend quality time with the children or pay for a trip to let the kids explore the nature and to encourage the children to develop better inter-personal skills.  For the business travelers, wait for Win8 tablet and push the manufacturers to release truly thin (<10mm) and light (<2lbs) notebook PC with touch and apps capabilities.  For those who like to read books, get a black & white Kindle or Nook.  I am sure that your hands feel so much more relaxed with something weight only about half a pound.  For the younger adults and older folks, keep your minds and eyes open, many things (friends, mountain, river, sea, ...) in your surrounds are worthed your time to listen / see / touch.  Don't get too hung up on machines!

  10. bolaji ojo
    March 2, 2012

    WY, You read my mind! Thank you.

  11. Patrick_yu
    March 2, 2012

    I did an experiment at the end of Mar2011, 3 weeks after iPad2 went on sale.  I went to Valley Fair Mall (the Apple Store in San Jose, CA) at 3:15am on Saturday.  At approx 4:15am, another fellow showed up.  At 8am in the morning, there were more than 100 people behind me.  I was the first one in the line of course.  The guards in charge of the line outside the Valley Fair Mall told me that the number of people were about the same everyday, regardless of the day of the week in the past 3 weeks. At around 8:15am, a lady started to distribute a ticket for every iPad / iPhone4 whoever inline wanted to purchase.  There were slightly more than 100 tickets.  White iPad2 with and without 3G were in short supply at the time.  The line was allowed to enter the Apple Store inside Valley Fair Mall at around 9am.

    This was an experiment because 1) I bought the two white iPad2 for my friend (he is just a friend, and I had no intention to buy one for myself); 2) I wanted to find out how many insane people were (and still are) out there.  I believe that Apple has created a piece of US history: in the past 100 years, iPad should be the only consumer product whose function is limited (relative to a thin & light PC at about the same cost (including essential accessories like cover and USB Dongle), e.g. Tosihiba R7xx – 4 pounds and 6-hr battery time) yet after three weeks being on sales, there were at least 3000 (based on 246 stores in US) people waiting in line all over the country to buy it.  This may not be a history for US only.  The aggregrate total was so much larger if the eager buys at the Apple Stores across the world were included.  For a device that does not grant human being the ability to fly and yet the device offer limited functions (not best of class in all the functions except the touch response), so many thousands of people want to buy it, everyday.  It is a consumer electronics miracle made.

  12. vimalkumarp
    March 2, 2012

    For a few dollars less, even in a counry like India people may opt for an iPad if there are no features. I think people are fascinated by the features when they make the decision to buy iPad and though cost is an important factor it is not as important as features

  13. baligeko
    March 2, 2012

    When the iPad 3 comes out, the iPad 2, will drop in price.

    This will also open up another consumer niche.

    AAPL WIN, WIN, WIN.

  14. FLYINGSCOT
    March 2, 2012

    I reckon cheaper Ipads will fly ioff the shelves.  Apple will do very well with this device as it gets the Apple brand withing reach of more people,

  15. Barbara Jorgensen
    March 2, 2012

    WY: You did something I have thought about doing for the same reason–an experiment–but I stopped doing camp-outs about 20 years ago. And those were for concert tickets. There hasn't yet been a device (for me) that is worth waiting up all night for or that I can't wait two weeks to buy. But that's just me. I applaud your experiment and thank you for sharing the experience.

    On one hand, I find it to be a positive that people seem to have enough disposable income to do this. On the other hand, it makes me worry about the rabid consumerism many of us in the US display. You used the word “insane” and I tend to agree with you. You are also correct that it is a piece of history. As Mr. Spock would say: “Fascinating.”

     

  16. Ariella
    March 2, 2012

    @flyingscot I agree. It is one of the fundamental rules of economics that demand increases when prices fall.

  17. Barbara Jorgensen
    March 2, 2012

    Cryptoman: I agree. The iPad is a leisure device and as such consumers should buy it according to their wallet. I love TV and movies, but there is a point at which I balk at the expense of having them at my fingertips 24/7. Especially with the lifecycle of these products. The iPad2 will be a collector's item in a year or so.

    My last major consumer expenditure was a 42-inch Sony LCD TV. That was more than 5 years ago. We still have it. The contrast isn't as good as newer TVs, but we've had the pleasure of using it for a long time. So far, I haven't regretted it.

  18. t.alex
    March 2, 2012

    I start thinking about the apps on appstore. How would Apple maintain compatability in terms of display ? Currently there are apps designed for iPhone screen and iPad screens (HD),

  19. elctrnx_lyf
    March 4, 2012

    The cheaper would be definitely a very good option since this is just an leisure device for the entertainment. How much does the price will be reduce with the screen size reduction. Will there be any other feature reduction?

  20. Barbara Jorgensen
    March 5, 2012

    @electronyx: I would think the less expensive version would have less storage as well. But there are a lot efficiencies that can be gained in screen production–smaller screen mean bigger yield per glass panel. Since the display is the biggest component of the iPad–at the biggest cost–the savings are considerable.

  21. JADEN
    March 7, 2012

    Cheaper iPad would likely find a receptive marketing if Apple finally release it, and this will further Apple tablet's dominance.

  22. Adeniji Kayode
    March 8, 2012

    Well, I heard and read it one time that when some devices start to come out in a lower price compared to when it first came out, there is a kind of reduction in the features in the cheaper versions

  23. Adeniji Kayode
    March 8, 2012

    @JADEN, I agree with you, I know a lot of people that are ready to buy IPAD1 if the price would fall

  24. Anne
    March 11, 2012

    Device with cheaper price usually come with low configurations like memory size, processor speed, storage size, etc.  For instance, there are laptop computers that are below $500 and some are far above this price, it all depend on the features. If I don't mind the storage capacity, the screen size, and the other features attached, I can buy a lower cost iPad.

  25. Anne
    March 11, 2012

    Sure, the lower price iPad will have less features.  The are the price, the better the features.

  26. Anne
    March 11, 2012

    @ Jaden

    Your are right, the lower price would have reception of the people that couldn't afford the high price ones and want to use iPad.  They shouldn't expect much features though it still an iPad from Apple, then they belong to the class of iPad user.

  27. t.alex
    March 16, 2012

    jaden, totally agree. This is the Apple's response to markets currently flooded with Android tablets.

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