Market Insight

Apple’s iPad family grows with two new offerings and a growing suite of options

October 17, 2014  | Subscribers Only

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Apple is expanding its iPad offerings with the launch of two new iPads, adding to a line that includes several generations of earlier models.

The iPad Air 2, the latest iteration of the 9.7-inch model, is 18% thinner than its predecessor, the iPad Air and includes:

  • An updated A8 chip, the A8X
  • Forty percent faster CPU than the iPad Air
  • A 2.5x improvement on GPU performance
  • 8 megapixel (MP) iSight rear camera

Both the iPad Air 2 and the updated iPad mini 3 incorporate touch fingerprint identification, and a gold case option, the first time either of these options have been available on iPads.

Pricing on the Wi-Fi only iPad mini 3 starts at $399 for the 16 GB version, while the 16 GB, Wi-Fi only version of the iPad Air 2 is available for $499.

Pre-orders begin on Friday, October 17, 2014.

Our analysis

The latest iPad launch highlights the longevity of Apple’s iPad products while simultaneously adding functionality and dazzle to its latest iPad offerings. The complete product line now includes three generations of product offerings, increasing Apple’s appeal to the value segment of the market, while luring its premium customers to higher value offerings.

The launch is highly strategic, capitalizing on the iPad’s established strengths, stressing connectivity and integration within Apple’s expanding product portfolio, and raising the bar again for overall tablet performance.  

With larger smartphones, including Apple’s latest offerings, cannibalizing some of the opportunity for smaller tablets, Apple placed its design focus squarely on the 9.7-inch product for this iPad update. The iPad Air 2 is a streamlined version of the iPad Air, with a substantially slimmer form factor, measurably improved screen performance, and faster chip, CPU, GPU, and touch performance. These enhancements are unique to the Air 2, with the mini 3 sharing only in the Touch ID upgrade and the new gold casing enhancements.

The iPad line up now ranges from the 16GB iPad mini at $249 all the way to the 128 GB, cellular version of the iPad Air 2 at $829. At each step along the way Apple provides a lure to pull the customer to a higher value offering. The initial steps are in $50 increments, expanding to wider price differences as the buyer moves further up the value chain in the selection process. The less pronounced upgrades to the iPad mini 3 are arguably best understood in this context as the device now plays a key transitional role between the older minis and the 9.7-inch products.

With iPads, the strength of the product offering is as much ecosystem as hardware. Apple played to this strength, while cementing the ongoing importance of this product category in its overall portfolio, by highlighting the improvements it has made in connectivity, allowing users to start a task on one device and seamlessly move to another. The inclusion of a better camera as well as more picture and video editing options continued the original iPad theme of user experience.

One of the iPad’s core strengths and marketing challenges is the longevity of the product. Replacement lifecycles on the iPad have stretched well beyond initial expectations, with many customers still using products that are 3 and even 4 years old. The combination of seamless operating system upgrades and hardware durability have extended product lifetimes and played a huge role in the expansion of the iPad’s active installed base, which now exceeds 150 million users globally.

This product longevity has allowed Apple to continue to move into lower price points with its iPad offerings, while maintaining its targeted profit margins. Savings in production costs on older product lines are passed along to end-users, luring in that all important first time purchaser at the entry-end of the product line, while the premium portion of the product line continues to evolve. This ability to span a wide range of customers is a key element of Apple’s global growth.

And for those users still clinging to their initial 16GB iPad 2, iPad 3, or iPad mini purchase, Apple is offering an attractive upgrade option. For just $100 over what they spent on the original purchase price of those models, those users can quadruple their memory capacity and trade up to a faster, more streamlined product, with a better display and in the case of the iPad Air 2, a much better camera. All of this and a shiny gold case to boot.


Apple Inc.
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