Would You Buy a 7-inch Apple ‘iPad Mini’ for $200?

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Tell me if this makes sense to you: Apple’s preparing to launch a significantly smaller version of its already not-exactly-huge iPad and keep everything exactly the same — including the 2048 x 1536 screen resolution — except for storage, which it’ll drop from the entry-level iPad’s 16GB to 8GB. Oh, and it’ll cost between $200 and $250 instead of $500. That’s the latest rumor tossed around by tech blog iMore, anyway.

Who knows if it’s true — it’s one of those rumors that, whatever Apple does or doesn’t do, will live on in one form or another — but let’s say it is true. I’m trying to imagine this thing (beyond the amusing Photoshop iPad image shrinks some sites seem to think we need as visual aids) and what its primary allure would be. $200 for an iPad would be pretty sweet, no doubt about that. Apple already sells gazillions of iPads at the $500 price point, so imagine what Cupertino might move for half that or less. And Amazon’s 7-inch Kindle Fire seems to be managing well enough from a sales standpoint (though you rarely really know the extent to which people are using these things — Nintendo’s Wii was gaming’s retail hero for years, for instance, but study after study indicates it’s hugely underused next to the Xbox 360 and PlayStation 3).

(MORE: 6 Reasons Not to Buy Apple’s ‘New’ iPad)

But Apple’s in a very different place than most of its competitors: Amazon has no iPhone/iPod Touch equivalent, for instance. And that’s often how I think about my 3.5-inch iPhone — just a miniature iPad, which is why I haven’t picked up an actual iPad yet. There’s very little I’d do with a 10-inch slate that I don’t already with my iPhone 4, from gaming (X-Plane, Infinity Blade, Civilization Revolution) to show-watching (Netflix, Hulu) to handing around family photos and videos to noodling in semi-sophisticaed music apps like GarageBand or Yamaha’s TNR-i.

As you’ve probably heard, even Steve Jobs scoffed at the notion Apple would release a 7-inch tablet, telling investors it had nothing to do with hitting a price point, but that it was “because we don’t think you can make a great tablet with a 7-inch screen.” According to Jobs, “The 7-inch tablets are tweeners, too big to compete with a smartphone and too small to compete with an iPad.”

It’s a finger/interface thing, said Jobs, claiming a user would have to have fingers “around one quarter of the present size … This is one of the key reasons we think the 10-inch screen size is the minimum size required to create great tablet apps.”

Of course Jobs conveniently overlooked Apple’s iPhone and iPod Touch when saying that, and I don’t recall anyone complaining about the Kindle Fire’s interface or its application icons being too small — though the default legibility of text without fiddling around sizing, on the other hand, has been a sore spot for some. Either way, the point is that 7-inch tablets hit what I tend to think of as a “confusing” spot for consumers — much too big to supplant a smartphone, not quite big enough to go toe-to-toe with the iPad and yet too cheap to dismiss out of hand.

(MORE: Apple’s 7-inch iPad: The Rumor That Just Won’t Die)

And what if the next iPhone’s screen is bigger, as rumors predict it might be, expanding from 3.5 to four or even as much as 4.5 inches? One thing Apple’s done reasonably well so far is maintain functional distance between its iOS products. There’s the 3.5-inch iPhone/iPod Touch or the 10-inch iPad and that’s it. Imagine an Apple-verse instead composed of 3.5-inch, 4.5-inch, 7-inch and 10-inch tablet/phones. How do you choose? What’s the functional point of a 7-inch tablet in the iPad-verse? It’s still too big to fit in your jacket or pants pocket, and only slightly better than the 10-inch version at sliding into an average-sized purse. Then there’s battery life (a smaller battery?), processing power (lower speed, to counter thermal issues?) and so forth to consider. With the latest iPad’s warmer thermal footprint, it’s hard to imagine Apple doing a straight size shrink without performance tradeoffs.

Sure, there’s the fabled $200-$250 price tag. But if Apple’s really just looking to stiff-arm Android, why not drop the price of the iPad $100-$150? iSuppli estimates Apple’s bill of materials plus manufacturing for the latest iPad is about $316. That doesn’t factor in additional expenses like software, licensing, royalties, etc., but I’m thinking about the games industry, where hardware margins are often razor thin, or outright negative, and the profit model tends to be in peripherals and software. Apple scrapes 30% off App Store sales/transactions and the company has a $100 billion cash hoard. Why wouldn’t it simply lower the iPad’s price, if this were really a price-point game?

While I have no doubt a $200 or even $250 iPad Mini would sell like crazy and even functionally appeal to many, the idea that Apple would shrink the iPad a few inches, drop the price and call it a day doesn’t wash. I’ll eat crow if this thing ever appears (in October this year, say rumormongers), but it’ll take a lot more than just a $200-$250 price tag to convince me it’s a good idea.

MORE: Is Apple CEO Tim Cook Right? Are Laptop-Tablet Hybrids Dead in the Water?