7-Inch Tablets Are Hurting iPad Sales

The growing popularity of 7-inch tablets, including the iPad mini, is apparently hurting sales of Apple’s full-sized iPad. According to a research note published yesterday by Citi’s Apple analyst, the Cupertino-based company is experiencing a dramatic slowdown of its 9.7-inch iPad business.

In the fourth quarter 2012, 9.7-inch iPad sales were almost flat, increasing only 1.8 percent year-over-year. In the United States and Japan, sales of Apple’s flagship tablets even declined by 9 and 26 percent, respectively.

This surprisingly quick slowdown probably has two reasons: For one, developed markets such as the U.S. and Japan might slowly approach saturation. Considering the fact, that the iPad, unlike the iPhone, can't be updated upon renewal of a wireless contract every two years, a certain level of slowdown seems inevitable.
What’s probably more important though, is the fact that smaller (and cheaper) tablets are starting to take a considerable chunk of the tablet market. Google’s Nexus 7, Amazon’s Kindle Fire and Apple’s iPad mini are all seeing decent sales, as they offer a good-enough tablet experience at an affordable price.

In line with Steve Jobs’ thinking that “If you don’t cannibalize yourself, someone else will”, it’s probably been a smart move by Apple to introduce a smaller iPad nonetheless. Even though the iPad mini may eat into sales of the larger iPad and hurt Apple’s margins, it will help to keep customers within the iOS ecosystem rather than losing them altogether.