The most valuable company in terms of stock price, and the most admired in terms of depth of supply chain capabilities is once again priming traditional and social media channels to hype the next new product release.  According to numerous entries, Apple is expected to announce the next generation of its iPad tablet sometime in March.  Rumors and other reporting indicate that the next generation if iPad will operate on a 4G network platform and will feature even finer screen resolution among other enhancemenrts.

Of more interest to our community is a report published in today’s Wall Street Journal (paid subscription or free metered view) which notes unnamed Apple suppliers as indicating that the goliath of consumer electronics is prototype testing a new tablet computer with a screen size of around 8 inches.  The WSJ reports that Apple is working with display suppliers AU Optronics and LG Display Co. to supply the test panels and to later qualify a volume supplier. The significance of a far smaller iPad screen revolves around a potential lower cost offering to counter two other tablets , the Amazon Kindle Fire  and Barnes and Noble Nook Color.

Our Supply Chain Matters previous commentaries on the battle of the tablet wars has pointed out the significance of lower price and leveraging higher volumes of tablets as a means to gain a platform for future sales of higher margin electronic content.  Just like smartphones, this is a battle for numbers of installed devices that can be leveraged for future products and services.  As such, competitors such as Amazon are willing to forego little or no profit on its Kindle Fire tablet in order to build a longer term value platform.

The obvious question surrounding these rumored pipeline developments now relates to how serious Apple wants to compete for the hearts and minds of price conscious tablet consumers by pricing a smaller screen version tablet as a serious competitive alternative to current lower cost offerings.  Also, is Apple willing to forego its current fat and highly profitable product margins to enter a battle of volume. Will Apple change or alter its current supply relationships?

We believe that the bigger prize lies in emerging markets such as China and India, and other growing regions where pent-up demand for a price affordable tablet computer with high brand recognition is most lucrative.

What happens next is something for all of us to observe.  Suffice to state that Apple’s next challenge for growth lies in emerging markets where the economics are somewhat different and where cost has much more meaning.  Apple’s supply chain inherits yet another challenge.

Bob Ferrari

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