What will be the popularity of the iPad mini – Lately, there have been a lot of talks on the Mini iPad. Let’s see the iPad Mini from an investor’s perspective. The idea of a smaller iPad makes a lot of sense. Apple has a long history of selling multiple sizes (MacBook pro and Air comes in 11, 13 and 15 inches). Tablets can come in multiple sizes as well. After the aspect ratio is picked (16:9, 4:3 etc.), the size would just be an option.
How can Apple price the iPad mini at $199 while the new iPad comes at $499? If Apple is facing the same resolution as on the iPad 2 and similar components, then it should be compared to the iPad 2 instead which is priced at $399. But the company plans to sell it for an even lower price.
Reuters reported on some evidence from court case between Apple vs. Samsung informing about iPad gross margins:
Between October 2010 and the end of March 2012, Apple had gross margins of 23 to 32 percent on its U.S. iPad sales, which generated revenue of more than $13 billion for Apple, the filing said. Apple does not typically disclose profit margins on individual products.
However, this data may not be accurate. Even at 32% level, it’s hard to believe a $499 iPad costs $378 to manufacture. iSupply stated the bill of materials and manufacturing to be at $316.05 for the iPad 3 16 GB, and $240.10 for iPad 2 16GB. UMB TechInsights says Apple earns a margin of 53% on the iPad 2. However, it should be kept in mind that lower end products such as iPod touch are sold by the fruit company. The iPod Touch 8 GB sells for $199, while the production costs are estimated to be $150. This shows a 30% margin.
An iPad mini if released earlier would have made sense, but now it seems like that won’t be the case. Even the Wall Street knows about the lower margins on the iPad. However, Apple still has 72.7% market share for tablets in China. Price won’t decrease it clearly. There is a possibility of a smaller iPad. Many sources have confirmed this. But the price is not confirmed. The price doesn’t need to be too low as there is already an established market share leadership. Let’s see whether Apple releases it below or above the sweet spot. Feel free to comment!