This could be quite expensive. In March 2012, IHS iSuppli pegged the display/touchscreen cost for the third-generation iPad at $127, compared with $97 for the similarly sized iPad 2 (which has the same resolution as the iPad Mini).
That said, electronics component prices tend to decrease over time. The cost of the iPad 2 display/touchscreen declined by $30 between its introduction in March 2011 and its price cut in March 2012. If Retina display prices decrease just as quickly, then Apple might be able to upgrade the iPad Mini’s screen while keeping the cost profile similar to that of the original iPad Mini.
However, if a Retina display would increase the iPad Mini’s display/touchscreen cost beyond $80, Apple would have trouble keeping margins at an acceptable level at the current $329 price point. With four times as many pixels, an iPad Mini with a Retina display would need a significantly upgraded processor to run smoothly. It would also need a larger battery (the third-generation iPad has more than double the battery capacity of the iPad Mini). These upgrades would add costs that would damage the iPad Mini’s gross margin.
Strategic considerations
The iPad Mini already appears to have cannibalized a significant number of full-sized iPad sales, despite having a lower-quality display. Upgrading the display while leaving a $170 price gap between the two seems likely to increase the rate of cannibalization. Since the full-size iPad earns more profit per device than the iPad Mini, Apple should be careful to maintain some differentiation between the two.
One way for Apple to square the circle would be by introducing the “iPad Mini with Retina Display” as a new product at a higher price point. For example, it could replace the iPad 2 at a $399 starting price. This approach would boost the product’s gross margin while narrowing the price gap between the full-size iPad and the iPad Mini.
If Apple goes this route, I would expect the current iPad Mini to stay on the market, potentially at a lower $299 price point. As an alternative, Apple could make some cost-saving cuts, as analyst Ming-Chi Kuo has suggested. Nevertheless, I think it’s unlikely that Apple will be able to bring the price below $299 this year. If costs continue to decline, a lower price may be feasible in the future.
Foolish conclusion
If you’ve been thinking about buying an iPad Mini but want a Retina display, it might be wise to wait a few months and see what Apple’s plans are. Cost considerations — and the danger of increasing full-size iPad cannibalization — make it unlikely that Apple will sell a $329 iPad Mini with a Retina display (but not impossible). However, the Retina display will probably be available later this year on a higher-priced version of the iPad Mini.
The article Will Apple Put a Retina Display on the iPad Mini? originally appeared on Fool.com is written by Adam Levine-Weinberg.
Fool contributor Adam Levine-Weinberg owns shares of Apple and is short shares of Amazon.com. The Motley Fool recommends and owns shares of Amazon.com and Apple.
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