the rumored 7.85" iPad's price, specs, and place in Apple's lineup
Rumors of a new, smaller iPad have been flying fast and furious lately. While this isn't the first time we've heard noise about such a device, recent reports from normally reliable news sources like Bloomberg and the Wall Street Journal, as well as the recent introduction of the Nexus 7, have lent this round of speculation some extra credence. If the Nexus 7's sales are as good as its critical reception has been, it could be enough to convince people that a seven- or eight-inch tablet can succeed when done well.
There has been plenty of reason to doubt a smaller iPad's existence: nearly every write-up about it includes some mention of Steve Jobs' infamous "you'll have to sandpaper your fingers to use a smaller tablet than the iPad" comments, and his vehement opposition to the idea of a smaller-than-original iPad was enough to convince me it wasn't happening in the short term. Now, the presence of seemingly legitimate sources for the swirling rumors, as well as Joel Bernstein's excellent analysis of the smaller iPad's size (which explains how the touch points in properly designed apps on a 7.85" iPad would be about as large as properly designed apps on a 3.5" screen), have convinced me otherwise.
Questions still remain: what kind of hardware would a smaller iPad use? How much would it cost? How would it fit into Apple's existing iOS lineup? I'll look at Apple's current lineup, its past behaviors, and the facts about the Nexus 7 in order to give you what I think are the best answers to those questions.
The screen
First, let's talk about the screen, and why it makes sense that this first iteration of the product wouldn't use a "Retina" display: Daring Fireball's John Gruber offers up a hypothesis that Apple could make the screen for the smaller iPad from the same screen material used for the iPhone 3GS, simply cutting the LCD material into 7.85" panels rather than 3.5" panels. This makes sense given that the pixel density for a 7.85" screen at 1024x768 is pretty much identical to that of a 3.5" screen at 480x320.
It follows that Apple could also construct a Retina version of the smaller iPad by using the same material currently used in iPod touch and iPhone 4/4S displays. In the long run, this does indeed make sense and it's probably what the smaller iPad would move to eventually, but I doubt it would be used in a first-generation product despite Apple's push toward Retina displays. Remember that the Retina display in the 2012 iPad needs both a gigantic battery and a new graphics processor that can get pretty toasty when fully loaded. Advancements in display technology and the process technology used to make these chips will eventually make a chip like the A5X, the Retina display it can drive, and the battery they both need feasible in a smaller 7.85" device, but it seems unlikely right now.
The processor
Assuming the smaller iPad will be using a 1024x768 screen like the iPad 2's, it would make the most sense for a smaller iPad to continue using the same dual-core A5 processor currently powering the iPad 2 and the iPhone 4S. Apple has been making this chip for a while, meaning that yields are going to be good, prices will be cheap, and developers won't have to change anything to support its capabilities. The low-power, 32nm version of the A5 that gives the $399 iPad 2 better battery life than the original iPad seems like a great fit for a smaller tablet with a smaller battery.
The possibility does exist that Apple could create a 32nm version of the 2012 iPad's A5X processor in order to reduce power requirements and push a Retina display, but let's check out the size of the current 45nm A5X relative to the 45nm A5:
The 45nm Apple A5, which measures 10.09mm by 12.15mm.
The Apple A5X at 45nm, measuring 12.90mm by 12.79mm.
Even if the A5X is shrunk to 32nm, and even if that shrinkage reduced the power requirements and heat output enough to make the A5X feasible in a smaller tablet, the A5X is much larger than the A5. This means fewer dies could be harvested from a single silicon wafer, increasing the cost of each chip. To hit a price point below the current 10" iPads while also maintaining its traditional healthy profit margins, Apple will want to cut costs wherever it can. Hence, the cheaper, proven 32nm A5 (and its accompanying non-Retina display) makes more sense than a hypothetical 32nm A5X.
Storage
Lastly, let's talk about storage: the 8GB in the entry-level Nexus is not nearly enough for an iPad, especially since the advent of Retina apps and their accompanying gigantic graphics started blowing up app sizes. An app like iMovie weighs in at 403MB, while a game like Infinity Blade II is a whopping 1.03GB. Even the 16GB iPad is feeling a bit small these days when fully loaded with media and apps, and I think anything less than that will cause major headaches on a smaller iPad running those same apps. 16GB seems like a reasonable minimum, with 32GB and 64GB upgrades available for those who want to shell out—same as the current 10" iPad and (most of) the iPod touch lineup.
The price
One of the most appealing things about the Nexus 7 is its price, especially given the overall quality of the tablet. But looking at its price and assuming that Apple must hit the same price points doesn't take all of the facts into consideration.
Google has said publicly that it's not making money on the Nexus 7. And the component analysis from iSuppli confirms that it's probably breaking even on the $199 8GB model, while turning a small profit on the $249 16GB model. Apple, with its extensive and well-managed supply chain, could probably build a 7.85" iPad more cheaply than Asus and Google are spending to build the Nexus 7, but Apple's product strategy has always been to sell products for a premium price and with a premium profit margin.
There's also the fact that non-iPad tablets have historically had to undercut the iPad significantly on price to attract consumer interest. You can see that reflected in the $200 price point of the Nexus 7 and the Kindle Fire, and 10" competing tablets like the HP Touchpad are also instructive. At its starting price of $500, the HP Touchpad was sitting unsold in storerooms. A few weeks later, its unprecedented fire sale price of $99 made it a bestseller. Apple can afford to mark up the price of the iPad relative to other tablets in its price class simply by virtue of the tablet being an iPad.
For these reasons, I see a new, smaller iPad with the specs outlined above starting at $299. This puts it within spitting distance of the $249 16GB Nexus 7 while maintaining a healthy profit margin, and slotting right in between the $199 iPod touch and the $399 iPad 2. If that seems too high, remember: if a smaller iPad doesn't sell well at its introductory price, it's much easier for Apple to drop the price after the fact than it would be to raise it, as we've seen with initially expensive products like the iPhone and MacBook Air. And doing so will usually get you good press and make people give you a second look.
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