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Pricing rumors swirl for iPad mini

Debate, speculation intensify on eve of expected small-iPad announcement from Apple

By , Network World
October 22, 2012 01:48 PM ET

Network World - On the eve of Apple's expected announcement tomorrow of a smaller iPad, there's still a lot of uncertainty and intense debate over its price.

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Analysts have projected prices starting prices for the "iPad mini" or "iPad Air" to range from $250 to just over $349 or even more, depending on the storage and connectivity options offered by Apple. The debate is over how Apple will "fit" the small iPad, which is thought to have a 7.8-inch screen, into the pricing structure of its current iPod touch, iPhone 5, new iPad and iPad 2.

A price tag of $329 was named over the weekend by Mark Gurman, writing for 9to5Mac and citing unidentified sources for that price. That number would position the smaller tablet between the new base-model iPod touch at $299 and the low end of the full-size iPad line, the Wi-Fi-only, 16GB iPad 2 at $399. Apple will offer two higher-capacity versions, both Wi-Fi only, "likely" priced at $429 and $529, according to Gurman.

That's more expensive than some, such as Apple watcher John Gruber, expected. "Curious too that none of the prices, for Wi-Fi-only or cellular models, land on "even" $X99 or $X49 numbers -- these prices would look a lot nicer if they were each $30 less," he writes in his DaringFireball blog.

Apple has a lot of options to play around with to control its manufacturing costs, or the "bill of materials" (BOM) and hence, both the final retail price and its all-important margins. The small iPad could start with just 8GB of storage; or opt for a less expensive touch screen that doesn't offer the high pixel density, and image quality, of its Retina display technology, as Gruber has speculated. Others have said that Apple won't offer cellular as an option.

Here's how Apple's current product pricing breaks down:

new iPod touch: Wi-Fi only 32 GB, $299; 64 GB, $399

iPhone 5 (with 2-year contract): 16 GB, $199; 32 GB, $299; 64 GB $399

new iPad: Wi-Fi only: 16 GB, $499; 32 GB, $599; 64 GB, $699; with cellular: 16 GB, $629; 32 GB, $729; 64 GB, $829

iPad 2: Wi-Fi 16 GB, $399; with cellular 16 GB, $529

Some have argued that this product matrix leaves no room for a small iPad, which "ideally" has to be priced at $299, given the pricing for iPad 2 and the new iPad.

But the key issue is how potential buyers see a small iPad in relationship to other Apple products, or possibly to rival products.

"Since the use cases of 7-inch tablets and media players [like iPod touch] are different, we're essentially looking at two different markets," says Sameer Singh, founder of Tech-Thoughts, and an analyst with Finvista Advisors, a mergers and acquisitions consulting firm based in India.

Singh predicted in August an iPad mini starting price of $299 based on his estimates of a bill of materials for the smaller tablet, based on what we know about the current full-size iPad.

[Another recent BOM analysis, by Ming-Chi Kuo of KGI Securities as reported by AppleInsider, had a very similar BOM total starting at $195 and a starting retail price matching Singh's at $299. Both see Apple continuing to accept lower margins on its tablet line compared to the iPhone.]

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