Did Apple gloss over the iPad mini 3 to keep focus on the iPhone 6 Plus?
This article may contain personal views and opinion from the author.
Let's start out with some basic facts that have to be established before we dive too deeply into what is happening with Apple right now. First of all, the iPad announcement last Thursday was extremely boring. Throughout the entire event, there were three interesting points - the cool laser cutting the pencil intro for the iPad Air 2, Stephen Colbert's bit, and the iMac Retina. That's it. The overall tone was more light-hearted and fun; but overall, it felt like there wasn't a huge reason for Apple to have the event. Even worse, all of those "high points" have serious caveats attached to them. Stephen Colbert's bit was funny, but didn't really add anything to Apple's overall message or product announcements. And, while the iMac Retina's display and price tag are phenomenal, the market for $2500 desktops is getting smaller by the day, as users opt for laptops and mobile devices instead of desktops.
The industrial design of the iPad Air 2 is breathtaking. Apple continues to be one of, if not the best hardware maker in the business, and being able to make the already impressive iPad Air thinner and lighter is truly a remarkable feat. That said, it is a feat that doesn't really mean anything. If you were to go out and poll actual consumers, the vast majority would probably have rather had Apple use those space savings for a bigger battery, instead of a smaller case (a similar sentiment is attached to the new iPhone 6 and 6 Plus). Unfortunately, Apple has device dysmorphic disorder, and sees the best way to improve as getting thinner and lighter, while ignoring the drawbacks of those decisions.
The missing iPad mini update
But, the part of the whole long mess that really interests me the most is the complete lack of attention paid to the iPad mini 3. In the lead-up to the event, the rumor mill was assuming that Apple wasn't even going to bother announcing a new iPad mini, and in many ways, those rumors came true. Apple didn't really announce a new iPad mini, but rather announced an iPad mini Retina with TouchID. The only differences between the iPad mini 2 and mini 3 are: 1) TouchID, 2) the new gold color option, and 3) a $100 premium for the mini 3.
Of course, the fact that the iPad mini 3 was barely an upgrade wasn't even the biggest problem with the announcement. The biggest issue was that Apple left both the iPad mini and mini 2 in their product lineup alongside the mini 3. So, customers can either choose a $249 iPad mini or $399 iPad mini 3, but both are made to look like terrible deals, because you can also still get an iPad mini 2 for $299. The mini 2 for just $50 more than the original mini is an absolute steal; and, the mini 2 for $100 less than the mini 3 is also a steal, considering the only difference on the spec sheet is TouchID. The lineup makes almost no sense. It would have made far more sense if the mini 3 simply replaced the mini 2, and the original mini was kept in the lineup for $299 (similar to the way Apple moved from the iPad 3 to the iPad 4); or, a worse suggestion (but still better than what Apple actually did) would have been to price the original mini at $249 or $299, put the iPad mini 2 at $349, and the mini 3 at $399. A $50 premium for TouchID makes far more sense.
The most reasonable explanation for the strange rollout of the iPad mini 3 is that this is a temporary solution. There are theories that the iPad mini 2 will be removed from the lineup completely in a month or two, and leave just the OG mini and the mini 3 as the options for smaller Apple tablets. There are a couple odd points with this theory though. First of all, it would mean Apple keeping the original iPad mini around, but it would make more sense for Apple to want to get rid of any non-Retina display devices as soon as it can. The other issue is that this idea tends to assume that Apple has extra mini 2 stock to get rid of, but Tim Cook is a supply chain genius, and having extra stock of anything feels out of character. One story about Cook's rise in the ranks of Apple talks about how in his first two years in the company, he was able to reduce inventory on hand levels from 2 months to just 6 days. With that kind of turnover, it's impossible to believe that there was extra stock that factored into the decision.
There is obviously also the cynical/conspiracy theory of it all that maybe Apple thought no one would notice that there is almost no difference between the iPad mini 2 and mini 3, and wants to pull in higher profit margins. I'd say that there is a pretty big issue with that idea as well; because, in order to believe that Apple execs can honestly think that little of its customer base, you would also have to believe that Apple is completely blind to media coverage. And, there is no logical way that anyone could believe that. Apple has one of the best public relations/marketing teams in the world because it understands the media and how to play the game far better than most. There is no way a company so committed to marketing would be that naive as to how this product would be received.
There is another possibility though - maybe Apple wants to cannibalize its own sales. When Apple first released the iPad mini, it cannibalized full size iPad sales. Fairly soon after the mini was first released, it made up 60% of Apple's tablet sales, which led to more tablet sales overall, but a drop in profit margins. Apple loves its profit margins, so maybe it wants to tilt those scales back a bit.
As we learned this week from Apple's quarterly earnings report, iPad sales are dropping. Where the iPhone saw a 16% rise in sales year-on-year, but iPad sales dropped by 12.8% year-on-year. Tablet sales across the ecosystem are on the decline, but phablet sales around the world are on the rise. And, if you didn't notice, a $749 iPhone 6 Plus is quite a bit more profitable than even a $399 iPad mini. Also, to a lesser extent, someone who would buy one of those two devices isn't as likely to buy both. In general, someone who buys a phablet, doesn't also go for a smaller tablet.
But, when it comes to Apple, profit margins are king. Apple doesn't have something like Google's ad sales to subsidize other projects. Apple has to make money on the hardware it sells in order to keep making its shareholders happy. iPhone 6 Plus sales might not compare to iPad mini sales at first, but Apple is obviously going to push hard with the 6 Plus.
Apple has already noted that demand for new iPhones is "not on the same planet" as supply. The implication with that statement was more skewed towards the 6 Plus, which is on backorder up to one month. Of course, what we're supposed to assume is that the reason why supply and demand are so far apart is because of the demand side, although the more reasonable explanation is that Apple simply isn't producing enough supply. The iPhone 6 Plus is a new device for Apple, and it is very likely that Apple is under-producing the device as it sorts out what the demand actually is. Doing that means no wasted inventory, and it gives the impression that the device is more popular than it might be.
There's a reason why Apple and Samsung are hard to unseat in the mobile space: they are the best at marketing, and making their devices popular. And, people like popular devices. Apple obviously wants to make the iPhone 6 Plus a success, and it wants the 6 Plus in the spotlight. That spotlight also gets to cover the iPhone 6 and the iPad Air 2, but the iPad mini is getting left out. Apple could have made better decisions to make the mini 3 a more attractive upgrade. At the very least, it could have put the A8 processor in it, rather than the A7. That still gives the premium to the iPad Air 2 with the A8X, while giving a bit to the mini. But, that's not what Apple chose to do. Apple chose to leave the mini out a bit, and focus on its more profitable devices.
This is a very interesting time for Apple. It has a lot of new devices to deal with. The iPhone 6 is a massive change, the iPhone 6 Plus is a whole new segment, the Apple Watch is in the works, and there are still rumors of a larger iPad Pro. When it comes to hardware sales, all of those devices have solid profit margins attached. The only device in the mix that doesn't is the iPad mini, which has tended to make up for the smaller profit margins with more sales. But, tablet sales are on the decline, so Apple seems to be refocusing back on the smartphone world and the iPhone 6 Plus.