According to supply chain sources which spoke to analysts at NPD DisplaySearch: "For the 7.85-inch panel, there's a business plan for it, there's a mass production target for it. And we know that it's for Apple.” Analyst Richard Shim added, talking to CNet: "Everything is getting set up. We know the lines.”
Apple has been rumoured to be readying a smaller iPad almost since it launched the first one – when most rivals responded with highly mobile 7-inch models, like Samsung's original Galaxy Tab. That speculation reached fever pitch, in the wake of Google unveiling its Nexus 7. That device is a head-on challenge to Amazon's 7-inch Kindle Fire, the most successful tablet after the iPad, but may also intensify the pressure on Apple to steal a share of the smaller slate space.
This is not, as some would say, to protect the iPad, which largely appeals to a different user profile compared to the very portable, affordable 7-inch devices. But that sub-segment is gaining ground, and Apple may feel it should reach out to that base as well as the market for larger tablets, many of them used mainly as secondary screens for video viewing at home.
Other reports suggest that the smaller iPad could be priced at $299, which would be more expensive than the Fire or Nexus 7, but a cheap option compared to the iPad HD. That would show Apple emulating its strategy for the iPod, which it followed up with a lower cost “nano” model to boost market share while retaining premium status for the larger version. It is likely to keep margins healthy by using a cheaper screen than the iPad HD's RetinaDisplay.
Shaw Wu, an analyst at Sterne Agee & Leach, said a cheaper iPad would be “the competitors' worst nightmare.” Apple has 61% of the tablet space, according to Gartner, even without a low cost option.
The most successful rivals have been those which offered a different value proposition to Apple's rather than going head-to-head – notably Amazon, which lures users with a low upfront price and compulsive user experience, and effectively subsidizes the cost of the hardware because it drives new content and apps sales.