Apple Inc. (AAPL) iPad: The Surrender

Recent rumblings suggest that Apple Inc. (NASDAQ:AAPL) has capitulated on the iPad, just as it did on the iPhone, and decided to release a cheaper version to meet growing demand. While the iPad Mini was meant to be Apple Inc. (NASDAQ:AAPL)’s response to cheaper tablets like Google Inc (NASDAQ:GOOG)‘s Nexus 7 and Amazon.com, Inc. (NASDAQ:AMZN)‘s Kindle Fire HD, each of which run the Android operating system and are priced starting at $200, the small Apple Inc. (NASDAQ:AAPL) tablet is still significantly more costly. It starts at $329 for a Wi-Fi-only model with 16 GB of memory. Just as with the case with the cheaper iPhone, you must ask if the hit to Apple Inc. (NASDAQ:AAPL)’s premium image can be justified by the significantly greater emerging market penetration the product may generate.

Source: Apple.

Source of the buzz
The genesis of the cheaper iPad Mini story seems to be a research note from Ming-Chi Kuo of KGI Securities. The note was referenced by MacRumors and picked up by many others. The note suggests that the cost of the new device will likely be between $200 and $250. In order to lower costs, maintain margins, and still offer an Apple Inc. (NASDAQ:AAPL)-quality product, Kuo offers several steps the company may take, including:

Squeeze suppliers on component costs.

Remove the rear camera.

Drop the memory to 8 GB.

Alter the fabrication of the A5 chips.

Switch from a metal to plastic shell.

Expand supplier options.

None of these are confirmed, nor is the product itself, but each seems like a reasonable solution given Apple Inc. (NASDAQ:AAPL)’s history. If the company is able to produce a new, low-cost iPad Mini, it remains to be seen how that step would affect other devices in the iPad family.