The Real Reasons Apple Will Ship a 7-Inch iPad

By

galaxynotead

Samsung is going all-out to promote the Galaxy Note as the company’s new iPhone killer.

The now-famous Superbowl ad imagines a scenario in which iPhone fans waiting in line outside Apple stores for the next phone see a guy using a Galaxy Note with a pen. They’re stunned as they realize that he can draw on maps and pictures using the phone’s stylus. So overwhelmed with the revelation that one might use a pen with a phone, than they bust out of the line and erupt in a display of unbridled enthusiasm all over the city.

Of course, pens exist for iOS devices, and anyone could buy one if they wanted. (Most people don’t.) And app makers could and do make pen interfaces and applications.

So what’s really unique about the Galaxy Note’s pen is the built-in pen holder. That’s the one feature missing from the iPhone that prevents users from doing what the hipster in the commercial is doing. OMG!! A pen holder! A PEN HOLDER!!! FINALLY!!!!

A hole in the phone where the pen goes is probably not going ignite a spontaneous Bollywood dance number when the Galaxy Note goes on sale at BestBuy February 19.

The real object of attraction for some users will be the phone’s giant screen. At 5.3 inches diagonally, the screen is one of the largest on the market. (By comparison, the iPhone’s is a 3.5-inch screen.) The device’s 800 x 1280 pixel resolution makes it seem even roomier than the diagonal measurement might suggest.

There are three classes of users who will be attracted to the big screen. The first is people who want a tablet, but one that fits in a pocket or purse and doesn’t require a second purchase. The Galaxy Note falls into a form factor called a “phablet” — both phone and tablet.

The second class is serious phone enthusiasts who download a lot of apps,  games and eBooks and want the biggest screen possible.

And the third is older people who struggle with normal-sized phones and their tiny screens and type sizes.

Samsung is also targeting women. In addition to white and black versions, the Galaxy Note will also come in pink. Many women keep their phones in their purses anyway, so a phone too big for pants pocket is not an issue.

The Galaxy Note is huge, but it offers lower pixel density than the iPhone (255 pixels-per-inch compared with the iPhone’s Retina display density of 330). So the Galaxy Note sacrifices quality of display for quantity, compared with the iPhone.

Although the Ice Cream Sandwich version of Android is optimized for unusual screen sizes, the Galaxy Note will run a customized version of Gingerbread at first, with an update expected later.

Like the iPhone used to be, the Galaxy Note is available officially only on AT&T.

Why Samsung Matters

The Samsung Galaxy Note, and all Samsung phones, are especially noteworthy to Apple because Samsung is the only other company making money in the phone space.

Apple made 80% of all mobile phone profits in the 4th quarter of 2011 (with only 8.1% market share.)

The only real competitor to Apple in that quarter was Samsung, which made 15% of the quarter’s profits.

Together, Apple and Samsung alone took in 95% of all mobile phone profits.

From a business perspective, there are only two significant players in the mobile phone market: Apple and Samsung.

This reality mirrors the tablet market, where there are only two significant players: Apple and Amazon.

Here’s why this is interesting. Apple’s only real competition in tablets is the 7-inch Amazon Kindle Fire. Their main competition in mobile phones from a profits perspective is Samsung, whose 5.3-inch Samsung Galaxy Note appears to be their new main flagship contender.

So the one and only place to have any chance of making real money in mobile phones and tablets is in the no-mans land between the iPhone and the iPad.

Nobody is making money with tablets the same size or bigger than iPad. And soon, I predict, nobody will be making money in mobile phones that are the same size or smaller than iPhone.

There’s money being made by Apple’s competitors in the intermediate space between iPhone and iPad because there’s demand for an intermediate device size. People want a device with a bigger screen than iPhone’s got, but a smaller price tag than the iPad’s got. And because Apple offers nothing in this category, some are turning to Amazon and soon to Samsung.

And that’s why I believe Apple will ship a 7-inch device.

Call it an iPod Venti. Call it an iPad nano. Whatever.

It won’t be a phone for several reasons. One is that big phones look ridiculous to hold up to your face. Another is that Apple wants you to buy a phone, too. And yet another is that the form factor would have to be aggressively priced in order to satisfy the demand for a low-priced alternative to the Kindle Fire, and phone functionality would make it expensive to own.

The advantage to Apple is manifold. First and foremost, a single device could drop a hand grenade into the laps of Apple’s only big business competitors: Samsung and Amazon.

Secondly, the device would be seen by Apple as a key element of their education strategy unveiled last month.

One major criticism by educators in my Google+ hangout on the subject is the cost of Apple’s vision of iPads as textbooks. There aren’t very many school districts that will be willing to shell out $500 a student.

The second issue raised by the educators, which hardly anyone else seems to appreciate, is that schools can send kids home carrying expensive consumer electronics that crooks want to steal. It puts the kids at risk.

So Apple’s iPad textbook vision doesn’t scale at 500 bucks a pop.

At $200 and below, it scales. And in order for Apple to reach that price point profitably, they’ll need to drop the size as well.

All Apple has to do is drop one iOS device intermediate in size between the iPhone and iPad into the market to solve its Samsung, Amazon and education problems.

And that’s why they’re gonna do it.