Will Apple Be Forced to Make the iPad Mini?

The iPad Mini rumors are cranking up again. The latest wave is a result of renowned Apple pundit John Gruber. In a recent podcast, Gruber said that he knows that Apple is testing a 7.85-inch iPad, but doesn’t know if the product will come out. Since the iPad Mini rumor mill is in full force, I called up eight tech analysts to get their take on the product. More importantly, I want to hear your opinion on the so-called iPad Mini.

Of the eight analysts I spoke with, three of them believe that a smaller version of the iPad will be released this year. The feeling among all three is that Apple has no choice but to enter this market. The Amazon Kindle Fire and the upcoming Google Nexus tablet leave Apple no choice. The former costs $199 and the latter is rumored to cost $249. This group believes that Apple will use the iPad Mini to counteract these products. One of them felt that Apple’s budget tablet will be priced at $249, while the other two felt that it will cost $299.

Three of the polled analysts believe that the iPad Mini will not see retail shelves this year. They believe that this is one of many products that Apple prototypes but never releases. The sentiment here is that Apple doesn’t need to compete in the budget market and traditionally has avoided technology races to the bottom (remember netbooks?). The feeling is that the $399 iPad 2 is attractive enough to budget shoppers. These analysts are not convinced that Apple can maintain its customarily high profit margins with a sub-$300 tablet.

Lastly, two analysts claimed that they’re not sure if Apple will release an iPad Mini in 2012. One said that it’s too soon to tell, which struck me as an unusual answer. One-quarter of the year is over. How much longer are you going to wait for a 2012 product prediction? The other analyst gave (what I thought was) the most interesting answer — he believes that it depends entirely on Tim Cook’s supply-chain machinations.

Tim Cook is famous for expertly managing supply chains. One reason Apple’s profit margins are higher than the competition’s is that it buys a ton of parts it believes it will need well in advance of products being assembled. It pre-pays for parts for low prices in areas known for wild price fluctuations (solid state memory, LCD panels, etc.). The last analyst I mentioned believes that Apple will only release an iPad Mini if it can maintain its traditional profit margins. Since the iPad Mini would presumably use most of the same parts as the iPad 2, he believes that this product depends entirely on how many parts Apple has in the burner and if it can still get those parts at cheap rates if demand surges. He candidly said that this information was beyond him and only Apple knows if a sub-$300 tablet is fiscally feasible for the company.

Aside from the “it’s too soon to tell” guy, all the analysts I spoke with have reasonable points and I understand each side of the argument. What do you think? I’m not asking if you want an iPad Mini or a cheapie iPad. Do you think it makes business sense for Apple to release such a product? Do you think the iPad Mini will land in 2012?