With the release of the next-generation iPad just around the corner, speculation is heating up over whether Apple will announce significant price drops to ensure the future success of the device. PCWorld is predicting Apple will drop the price of the iPad 2 to $300, and possibly release an 8-inch iPad ‘mini’ for as low as $200 to compete with the Kindle Fire. To them, I say, why? Releasing a $200 or even $300 tablet would be the equivalent of Apple releasing a $500 laptop – it’s just not in their DNA.
They’re much more likely to continue selling the iPad 2 alongside the iPad 3 (or 2S, if that’s what it’s called) at a discount, in the same way they sell the iPhone 4 and 3GS alonside the 4S. They can do this, while maintining their profit margins, because of the constantly decreasing cost of components. According to Bloomberg, the profit margin on the nearly 3-year old iPhone 3GS is about the same as the recently released 4S; we should expect a similar case with the iPad 2 after the next-generation device is released (likely) in the next few weeks. But Apple has no reason to drop the price all the way down to $300; they’re still selling plenty of iPads at $500 and up, so a discount to $400 for the previous-year model would be much more reasonable, while still continuing to fend off most of the ensuing Android competition.
And what about Amazon’s Kindle Fire, and other 7″ tablets at half that price? As Apple’s said before, they’re not really concerned, and for good reason: they’re not really in the same market. The Fire is a high-end e-reader, and the iPad is a full-size tablet. While mini tablets can run a lot of the same kinds of apps that their larger counterparts can, not many consumers are going to replace their home PCs with a Kindle Fire; but an iPad? It’s already happening. And I think that’s the big difference: full-size tablets – currently heavily dominated by the iPad – are in more direct competition with the PC market, while 7″ tablets for the most part aren’t. If anything, they’re in closer competition with large-screen smartphones than they are with PC’s. So while similar, the iPad and Kindle Fire are in two very different product categories, the cheaper of which Apple has no reason or desire to pursue.
Now, this isn’t to say Apple will never release a cheaper iPad; I think they would be wise to release a rugged low-end version of the iPad aimed squarely at the education market some time in the future, perhaps at the $300 price point. I’m not holding my breath for that to happen this year, or even next, but maybe in 2014 or 2015, when the tablet wars have really heated up. After all, we’re still in the first quarter of this new game of tablets, and there’s a lot of plays yet to be made.
