Apple's lower-priced iPad Mini will significantly cannibalize sales of the company's full-sized iPad, with up to half of customers opting for the smaller tablet, an analyst argued today.
Most experts have estimated the iPad Mini's cannibalization rate at between 10% and 20%, but Sameer Singh of Tech-Thought came up with a number around 50% after pulling sales data from the recent Apple-Samsung patent infringement court case.
Apple launched the 7.9-in. iPad Mini last week at prices starting at $349; the smaller tablet reaches retail on Friday, Nov. 2, when pre-orders will also be delivered.
The tablet is currently back-ordered two weeks for all configurations.
By Singh's calculation, the iPad Mini will have a cannibalization rate of 50% or higher. In other words, at least half of the iPad Mini sales will come at the expense of larger iPads as customers choose the less-expensive device.
He came to that conclusion by using sales data for the iPad 2 that was disclosed during the Apple-Samsung trial. That data, said Singh, indicated that the iPad 2, after it had been reduced to $399 at the March launch of the third-generation iPad, was not only the single-most-popular iPad model during the quarter, but that its cannibalization rate was most likely between 58% and 61%.
Singh spelled out his methodology in a post today on the Tech-Thought website.
"The cannibalization impact of the iPad 2 was primarily driven by the fact that it was priced $100 lower than the third-generation iPad," Singh wrote on that blog. "Now we have two levels of cannibalization, with an iPad Mini priced $70 lower than the iPad 2 and $170 lower than the fourth-generation iPad. Based on [those] points, even though the iPad Mini is a smaller tablet, the cannibalization impact is unlikely to be far lower than it was for the iPad 2. [So] I would expect the iPad Mini to cannibalize at least 50% of iPad sales ... for every 5 million iPad Minis sold, Apple would lose at least 2.5 million [larger] iPad buyers."
Although Singh's prediction of iPad Mini cannibalization can't be checked until January, when Apple releases sales figures for the last three months of 2012, the boom in iPad 2 sales that he used as a precondition can be by looking at the ASP, or "average sales price," of iPads overall.
In the first quarter of this year -- Apple cut the iPad 2 price to $399 on March 7, three weeks before that quarter's end -- the iPad ASP dropped to $559 from the previous period's $593, hinting at a surge in sales of that model. The iPad ASP fell even further, to $538, in the second quarter, when the cheaper iPad 2 was available the entire quarter. And during the third quarter, the ASP remained flat at $535.
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