Apple has pitched the iPad as in between unit – right between the iPhone and a Mac. That leaves the door open to what kind of commercial strategy lies ahead for the iPad. The way I see it, we have a pretty good shot at seeing a $399 iPad by April.
If the iPad follows the iPhone model, we’ll see the original model take a back seat, lower priced role while iPad 2 is rolled out. This helps clear inventory and can even help sales by reaching down into lower price points. For example, users can pick up a $49 iPhone with little effort from AT&T. This helps users get hooked on the product and hit with monthly fees that make the $50-$100 discount look pretty silly.
According to this story, Apple and their iPad supplier Foxconn are pumping out 10,000 iPads a day. We’ll see some overlap of product production just before the new iPad is announced (we expect to see that in January or by March at the latest). We expect the second generation to be the usual Apple upsell: thinner, added features (retina display, cameras, faster processor). That leaves a welcome whole for a lesser product (iPad 1) at a lower price.
Why $399? Simple, competitors are knocking at the door with $400 on contract. A larger iPad with no contract (WiFi only) for the same price as a 7″ Android with $20 a month contract looks like an absurd comparison (assuming you are not an Android or Apple rabid fanboi). And indeed, Apple loves to make those kind of choices simple for us. Apple can feed off the lower-priced market with the first generation while keeping those on the edge paying top dollar and reaping higher margins.
Is the tablet market, like computers a race to zero? Or will faster refreshes keep price points up higher, like smartphones in the US costing $199? It remains to be seen but I suspect Apple will strive to keep the prices high while showing solid value to consumers.
With a years production under their belt complete with reliable consumer demand data, Apple can easily squeeze $100 off the retail on an older product.