Market Overview

iPad Mini's Anticipated Declines Are Reinforced by New Report

Is Apple (NASDAQ: AAPL) bracing for an iPad Mini sales decline?

Every few weeks, a new report suggests that the answer is "yes."

In March, iPad Mini shipments were expected to decline in preparation for the launch of the next-gen model. Apple cannot sell more units than it ships, so this could feasibly hurt the company's bottom line.

Additional details came to light in April when shipments were rumored to decline by as much as 30 percent this quarter. Now DigiTimes has reported that one of Apple's suppliers, AU Optronics (NYSE: AUO), could reduce its panels from four million units to no more than 2.8 million units.

AU Optronics is one of two companies that builds panels for the iPad Mini. LG Display, the other manufacturer, is expected to provide an additional seven million panels for iPad Mini production.

If these reports are true, Apple will have shipped and sold around 10 million iPad Mini units by the end of the June quarter.

While this might sound like a huge deal, it actually falls in line with Apple's current success rate. The company set a new quarterly record when it announced that it had sold 19.5 million iPads during the January-March sales period. More than half of the iPads sold were of the Mini variety, proving that the smaller form factor has a bright future within the industry.

Historically, iDevice (iPhone, iPad, iPod Touch) sales decrease before the new generation arrives. Thus, Apple's third quarter (which covers the April-June sales period) sales are likely to be lower by default.

Even so, Apple may not actually encounter a decline this quarter. If 10 million iPad Mini units are sold, Apple would only need to sell seven million full-size iPads to match the sales of the fiscal 2012 third quarter. On that basis, iPad sales would be in-line with the year ago period.

The only downside here (if any) is that Apple must then come up with a way to inspire new iPad purchases this fall. Unlike smartphones, tablets are a pricey, long-term investment. T-Mobile (NYSE: TMUS) has attempted to level the playing field (and eliminate all subsidies) by charging full price for a contract-free iPhone, which costs $150 more than the 10-inch iPad. Even so, consumers are still likely to dump their smartphones every two or three years.

The same has not been true for the iPad. As long as these tablets continue to function, consumers will continue to use them. Apple could begin to cheapen its products to increase the rate of failure and inspire frequent upgrades, but that would destroy the company's image.

Thus, if Apple wants to increase iPad sales and set a new record this fall, it needs to give consumers a reason to upgrade. It could be a better battery or a superior display. Whatever it is, there needs to be a draw beyond the "2" that Apple might slap on the box.

Even without any groundbreaking features, the iPad Mini is still likely to perform well this year. While sales of the full-size iPad seemed to have piqued in 2011, consumers are very intrigued by the smaller iteration.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

Posted-In: Apple AU Optronics Digitimes iPad MiniNews Rumors Tech Best of Benzinga

 

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