It is that time of the year again. Apple is all set to announce the next version of its incredibly popular tablet, the iPad. As usual, mass media is in mass hysteria in speculating about what the tablet will look like, what it will do now that it didnt before and how long it will last on a full battery charge. Given that the iPad is in a market of its own, it is only fair that the upcoming launch get a post of its own.
So here is what we think the iPad3 will look like. It is widely expected to have the Retina Display made popular by the iPhone4. The display resolution will likely be 2048 x 1536. That would allow current apps to scale easily without much code rework. The iPad3 is also expected to have a much better camera- both front and rear. One of the very few widely panned features of the iPad2 was its camera. Expect Apple to correct that with some really good optics this time around.
Then there is the topic of LTE vs. no LTE. It is anticipated that Apple will continue to go to Qualcomm for its iPad radio solution. The truly next generation Qualcomm tablet chipset, the MDM9615 solution announced last February is yet to be spotted in mainstream devices. It is possible that the iPad3 will be the torch bearer of the second generation solution from Qualcomm. Or Apple could surprise everyone by continuing to stay with its HSPA+/EV-DO solution available on the iPhone 4S. Operators are still in the midst of a nationwide rollout and while the iPad3 would serve as a good LTE deployment motivator, it will still take time before everyone has LTE coverage to make use of the radio on the iPad3. An LTE solution would be a leap ahead for the iPad3, but given the higher price point, it will be more of a technology victory than a real commercial driver.
There is also speculation whether the iPad3 will be a quad-core A6 speed demon or a more conservative dual core modified A5 solution. The former would make it a true technology trailblazer. The latter would be more in tune with past Apple design choices of a conservative processor but excellent kernel optimization to make the experience seamless.
Speculation done, here is where the meat of the conversation is. The price point of the iPad3 and the future of the iPad2. So here are three possibilities.
Option 1: Replace iPad2 with the iPad3 and continue to sell it for $499
This would be the conventional choice. Apple has followed this strategy not just with its tablet but also its phones and iPods. Introduce a new model every year to replace the older one at the same price point. This would allow them to sell a single WiFi SKU and a couple (or three based on Sprint) of WAN based models with different SIMs but same radio solution from Qualcomm. This would also give them flexibility and cost savings at the operational level.
Option 2: Introduce the iPad3 at a higher price point but continue to sell the iPad2 at $499
This would be the less radical of the two unconventional choices (the second one being Option 3 described below). The iPad3 will have an expensive display panel that will add to the cost. The optics will also add some overhead. Not that Apple is losing money on the iPad2. But Apple could choose to make the iPad3 a premium product and thus a new segment. The new unit could possibly have a quad-core processor to make it more attractive for the higher cost. For everyone else, there would be the iPad2 at the current price.
Option 3: Introduce the iPad3 at the $499 price point and drop the price of iPad2 to $399 or lower
This would be radical by Apple standards but make a lot of sense. Apple makes a lot of money on the current iPad2 – almost 40% profit margins. Given that it is a year old, they have probably lowered the cost of materials even more. So it is entirely possible that they could sell the current model for an appealing $399. That would be a significant blow to the current pack of Android tablets that are competing on price with the iPad2. Heck, if Apple drops the price of the iPad2 to lower than $399 (say $349 or gasp! $299), that would completely wipe everyone else out. But a significant price drop below $399 would also affect Apple’s future iPad pricing strategy. Getting the consumer accustomed to a cheaper Apple tablet would mean that they would have to continue offering one at that price and that would eventually cannibalize their own higher end and more profitable tablet. But at $399, they could hold both the mid and higher end of the product spectrum- almost like the iPod touch and the iPhone. And that would be a big blow to all other mid and high end tablet makers.
I anticipate Option 2 to happen. But Apple is known to surprise and Tim Cook is an operations genius. They could go for the game changing Option 3 and stir the industry.
For once, I am less excited about the actual product than how they price it. It all makes for a very interesting and hotly anticipated event on March 7. Mark your calendars.