The "iPad Decline" - Part 2

Neil Cybart: Apple's New Personalisation Product Analysis 

I think Neil Cybart has a pretty good reasoning for the current iPad situation. 

Quote from Above Avalon:

"Instead of product quadrants, a new type of analysis is needed to measure Apple's long-term objective and strategy. In Exhibit 4, I highlight how Apple views its current product line where screen size and mobility are the primary differences between products. Now each device can appeal to consumers in various segments of the market from education to enterprise to content creation and content consumption. Personalization is becoming a much bigger factor. In this table, the iPad's role is to serve as a placeholder for those who want technology with a slightly bigger screen than an iPhone or someone who wants a more simple and interactive device than a MacBook. While some may enjoy the iPad, there will be others that have no use for such a device. "

Exhibit 4

"Exhibit 5 depicts what I would call an Apple Product Screen Personalization analysis, which includes unit sales estimates for every major Apple product ranked according to screen size. Over time, while the peaks may shift left or right, I think the general shape will remain true as the iPhone remains the top seller and other devices fall in line."

Exhibit 5

My thoughts: 

The iPad is just a relatively new product and it's finding it's place. It will slowly settle down and a few things will become much clearer. Things like the typical user upgrade cycles. Sure, it's going through a "speed bump" right now, as Tim Cook calls it, but overall, the iPad has a long life ahead of it. People who think the iPad is going the way of the dinosaur need to get their head examined. The iPad plays an important role in Apple's ecosystem. Perhaps if we look at the iPhone as the centre or a large part of that experience, then the iPad plays a role somewhat similar as that of the Mac - an extension or another essential part/piece of the Apple experience. In other words, the iPad is a companion device to the iPhone or the Mac. And I believe that's the way Apple intended it to be when they launched it in 2010. 

In fact, during the October event last year, Tim Cook had this to say when concluding the presentation: 

"This is the strongest line-up of products that Apple has ever had. And we believe that each one of these play a very important role. People need different types of technology for the way they live their lives. We all do different things.

In fact, many of us and many of our customers use more than one of our products every day. Sometimes you want to sit at your desk in front of a huge beautiful immersive screen, packed with powerful technology. And we’ve made that much better today with the Retina 5K screen for iMac.Sometimes you want to take that powerful technology with you wherever you go, and we’ve made our notebooks even better this year with MacBook Air and MacBook Pro.Sometimes you want to be close to your content, touching it and we’ve made that experience even better today with the iPad Air 2, more powerful and incredibly thin.Sometimes you want to hold that powerful technology in the palm of your hand and there’s no better thing for your hand than the iPhone 6 and iPhone 6 Plus.And soon, you can wear that powerful technology right on your wrist...They are designed to be incredible products individually but they are also designed to work together seamlessly.”

Tim Cook's statement further reinforces my believe that the iPad is an essential part of the Apple ecosystem.

Going Forward - What's Next? 

The Current iPad Lineup

Apple's current iPad lineup since the October 2014 refresh has become very cluttered. 

The iPad Mini 3 and Mini 2 are essentially the same device. The only thing that separates them is that the Mini 3 has a gold colour option and Touch ID. In my opinion, the iPad Mini 3 is not worth the price premium over the Mini 2 and it is grossly overpriced. In fact, the base Mini 3 model - Wifi-only 16gb, costs the same as the base iPad Air model. I would recommend the iPad Air over the Mini 3 to most people. The Air has a larger screen, so by extension, I would argue it has added usability and a screen that has a larger colour gamut than the Mini 3. The Mini 3 uses the same screen as the Mini 2 and that particular screen has been criticised for not being up to mark as it has a poor colour gamut. 

Now having said that, I think with the October 2014 iPad refresh, it's been made pretty clear that Apple is pushing customers to the iPad Air 2 and previous-generation iPad Air. These two models just seem to be the most compelling out of the lineup of five devices. The iPad Air 2 got an A8X Chip, upgraded camera, laminated display, gold colour option and Touch ID. Meanwhile, the Mini 3 only got a gold colour option and Touch ID. It would seem customers would get more bang out of their buck buying either the Air 2 or Air. I suspect Apple's intent with the Mini 3 was to make the 9.7" iPads more compelling. 

Apple employed a similar strategy when it reconfigured iPhone storage options. By offering 16, 64 and 128gb options instead of the traditional 16, 32, 64gb options, Apple was essentially pushing people towards the 64gb model. And I suspect most people who purchase an iPhone 6 and 6 Plus would go for the 64gb option, since 16gb might seem too little and 128gb might be abit too much, and too expensive. 

The iPad Mini 1, together with the iPod Touch(Which hasn't had a major update since 2012) serve to be an entry point into the Apple ecosystem. 

iPad Lineup (October 2015 Refresh) 

Nothing is concrete yet, but it seems highly likely that Apple is working on a larger iPad model with a 12.9" screen size. People are dubbing it the "iPad Pro". Personally, I think it will most likely be called the "iPad Plus". 

You can read more about it here:

http://appleinsider.com/articles/15/05/03/apples-129-ipad-will-feature-bluetooth-stylus-force-touch-nfc-more-source-says

Apple is without a doubt also working on both an iPad Air and iPad Mini refresh. With these in mind, here's what I think the new iPad lineup should be like. 

iPad Pro(12.9")(High-end) - Enterprise, productivity-focused

iPad Air 3(9.7")(high-end) - Consumer-focused

iPad Mini 4(7.9")(Mid-to-High-end) 

iPad Air(9.7"")(Low-end, entry level) 

Both the Pro and Air 3 would serve as the flagship iPad models, with the Pro servicing enterprise users and being the enterprise and productivity-focused flagship. Apple would most probably charge a price premium for the iPad Pro, and this would serve to push up iPad ASP(average selling price), which has fallen over past few years. 

The Air 3 would be a high-end model for those that like the current 9.7" screen size(like me) and don't want anything bigger, yet want the best specifications that Apple has to offer. Thus, the Air 3 would be the consumer-focused flagship. 

Statistics show that most consumers prefer the 9.7" screen size. 

Current Breakout of iPad devices in Use as of January 5, 2015  

Note: 

9.7" screen size: iPad 1, iPad 2, iPad 3, iPad 4, iPad Air, iPad Air 2 

7.9" screen size: iPad Mini, iPad Mini 2, iPad Mini 3 

Having said that, there are customers that prefer the 7.9" screen size that the Mini line has to offer. Thus, I believe, and it appears so, that Apple will refresh the Mini line with a Mini 4. Leaks are indicating that Apple is working on an iPad Mini update: http://appleinsider.com/articles/15/04/07/chassis-allegedly-for-apples-a8-powered-ipad-mini-4-shown-in-new-pics-video 

I believe the Mini 4 will be mid-to-high-end, meaning it will have pretty high-end specifications, but one generation behind the Air 3 and Pro. It will most probably utilise the A8 or A8X processor, while both the Air 3 and Pro would like employ either the A9 or A9X. The Mini 4 should be the only 7.9" iPad in the lineup. 

Neil Cybart of Above Avalon argues that 

"Apple should stop selling the iPad mini. As a low-margin response to cheap Android tablets and given the lack of a large iPhone, the iPad mini served its purpose keeping Apple in the tablet game, but today there really aren’t many reasons to keep the iPad mini around.  Consensus seems to think Apple will add Touch ID to iPad mini later this week along with some other updates, but beyond that, unless sales trends improve (I wouldn’t expect them to), I don’t see the iPad mini staying in the line-up for too long and I think that is only for the better.  In order to keep product offerings in the same price range as iPad mini, Apple could work on lowering iPad Air pricing to approach that $299 level over time."

This was written before Apple's October 2014 event. We now know that the entry level iPad(iPad Mini 1) sells for USD$249. He was also right in hypothesising that the iPad Mini would receive a small update. I disagree with him that Apple should totally remove the iPad Mini from the lineup. I think Apple should keep one iPad Mini in the lineup to service those that like the 7.9" screen size. 

I however, agree with him that Apple should work on keeping the previous generation iPad Air in the lineup and to work on lowering the Air to entry level price point - $249. Thus my recommendation that the entry level iPad be the 2013 iPad Air. 

Conclusion 

I do not think that the iPad is going anywhere. Rather, we had a few years of explosive growth, so much so that now that's it's settling down, we see the current sales as disappointing. I don't think it's any cause for concern.

Over time, Apple will no doubt continue to refine the iPad lineup, bring us better iPads along with better software and services.