The iPad shows again that Apple isn’t afraid to compete on price

Even before the new iPad debuted in San Francisco on Wednesday, rumors were circulating about the iPad 2′s future. Was Apple about to expand its tablet line through a similar strategy as it had already done with the iPhone? Yes it was, and it is a signal that things are a-changin’ in Cupertino.

The iPad 2 takes the role as the budget model, its price cut by $100. The 16GB WiFi version now comes in at $399, with the WiFi+3G model retailing for $529. It is obvious that Apple has no desire to play with the bottom feeders — the Kindle Fires of the world — but sure as heck will make its tablet competitive with those in the same league.

Samsung is playing on price here too, peddling its Galaxy Tab 2 for $350. The screen is just seven inches though, which is arguably too small for some tablet applications. For $50 more you can have an iPad, with a bigger screen and basically the same specifications. Apple just put a good deal of pressure on a rival that has given it fits over the years. Do you blame them?

Apple’s move to keep the iPad 2 around is part of a bigger strategy by the company which allows it to compete in an area — price — which is generally foreign for the company. Its detractors have long been fond of talking about the “Apple Tax,” where the company charges a premium for a product that has similar specifications to its competitors for much less.

Sometime over the past several years things changed. Apple quietly lowered its price points, while at the same time beginning to give up its longstanding tradition of completely refreshing its product lineup once an updated version launches. Like the iPhone 4S/4/3GS arrangement, the iPad 2 is a sufficient tablet for a large majority of consumers, and that’s what it’s about. Expanding the market, staying dominant.

Keeping around “last year’s stuff” also keeps the company true to its own business ideals. It is heresy for the company to release a substandard product without any kind of wow factor. This is why you will never see Apple directly compete with the Kindle Fire: there is no such thing as low-end in Cupertino.

Will Apple eventually compete in the mini-tablet sector? Probably, and rumors suggest that one is in the works, and in some cases they indicate Apple may already be purchasing the parts to build one. But its not going to be as cheap as the Fire or other budget tablets.

Just a guess here, but I think a “iPad Mini” will likely come in at a $299 price point or so. It is going to be similar in functionality to the iPad 2 now, unless Apple figures out a way to construct those Retina displays cheaper (that’s not going to happen for now). Either way, when put aside a Kindle Fire the smaller iPad will blow its competitors away, and people are going to pay that “Apple Tax” for a better product.

Could I be crazy in my thinking here? Possibly. At the same I don’t think its crazy to believe that Apple is serious about maintaining its dominance in the “post-PC” market, and realizes price and value are the biggest factors in keeping them on top, especially with the cheap-and-cheerful harbinger of Windows 8 on the horizon.

The iPad shows again that Apple isn’t afraid to compete on price