Why does the first-generation iPad mini still dare to be so expensive? Where does Apple's confidence come from?

iPads, price and self-selection

This article is authored by Benedict Evans and originally published on his personal blog.

The Apple iPad event brought surprises as expected. The standard-sized tablet is now faster and lighter, while the mini finally has a Retina display. Now we just have to see if the supply chain can meet the massive consumer demand.

Surprisingly, neither of the new iPads was equipped with fingerprint recognition functionality. However, the bigger confusion lies in the fact that the price of the old mini dropped to $300. Meanwhile, the new Nexus 7, which competes with the mini 2, is priced at only $230. Compared to this, the mini 1 offers no pricing advantage. Why didn't Apple set the price of the mini 1 at $275 or even $250 instead of sticking to $300?

Below is a chart showing the sales figures for various tablets in the U.S. market (excluding Kindle Fire), indicating that Apple's share in the tablet market has started to shrink.

Apple’s recent sales have slightly declined, mainly due to the product cycle. While other brands' tablet sales are growing rapidly, one interesting point stands out: Nexus sales are astonishingly low. A great Android system and highly competitive pricing have not sparked much interest among consumers to buy the Nexus. Exclusive data from Google shows that the shipment volume of the Nexus 10 was less than one million units.

On the other hand, the usage rate of iPads reaches as high as 75%, largely thanks to the vast number of applications within Apple's ecosystem. But what about the Nexus? And how about non-Nexus Android tablets? If you want to experience the "post-PC" era created by Apple or Jobs, you would buy an iPad. In this segment of the market, Apple holds a significant share. Due to the lag in Android tablet apps, they cannot replace the functional experience of the iPad.

However, there is another group. Chinese Android tablets priced between $75-$150 serve purposes entirely different from the previous two. Why do people buy them? What are their functions? The market for these tablets is concentrated in China, some low-income areas in the West; their functions include a bit of web browsing, a few free games, perhaps e-reading, and most importantly, heavy video consumption. It can be seen that their competitors are not iPads, Nexuses, or Tabs, but TVs. In other words, they are more like "feature phones in tablet form".

If this theory holds true, Apple currently still lacks strong competition, and thus the $300 mini faces no pressure. However, tablets have already diverged into two completely different categories: one is the "post-PC" experience product controlled by Apple; the other is the ultra-low-priced product that claims to be a "tablet" but serves entirely different functions.