Apple Is Taking A Big Risk Hiking The Price Of The iPad Mini

Apple's iPad event only had two real surprises.

First, it's renaming the big iPad the iPad Air. Second, the new iPad Mini with a sharp Retina display will cost $399.

This is effectively a price hike on the iPad Mini, and, as far as we can remember, the first time Apple has raised the price on an iOS device.

Last year, the iPad Mini debuted at $329. We would have expected Apple to stick with that price.

This is a strange, high-risk move from Apple.

The tablet market is increasingly filled with low-cost competition from Amazon and Google. The 7-inch Amazon Kindle HDX is $229. The Nexus 7 from Google is also $229.

Arguably, both of those tablets are inferior to the iPad Mini with Retina. The iPad Mini has a bigger display, and it has a richer ecosystem with 450,000 apps built just for the iPad.

But, they're not that much worse than the iPad Mini. And, with the holiday season coming up, a lot of people are going to buy those low cost alternatives from Google and Amazon instead of the Retina Mini.

For Apple, those are customers it could lose for a while. It looks like the upgrade cycle on tablets is more like PCs than it is like smartphones. That means those people might not buy a new tablet for 3-4 years. When they're ready for their second tablet, they may stick with Android.

The iPad business is robust, selling millions of units on a quarterly basis. Yet, it's also in a weird, surprisingly weak position, as unit sales were down 14% on a year-over-year basis in the June quarter. Sales could be down again in the September quarter. It's hard to imagine a more expensive iPad reigniting sales.

Apple is supplementing the Retina iPad Mini with a non-Retina iPad Mini for $299. But that non-Retina iPad has been smoked by the still-cheaper Android competition.

People will line up for more expensive iPad Mini whenever it's out, but perhaps not as many as would have lined up if Apple had stuck with its original $329 price.

We know the rationale for upping the price: It's a better screen. Apple will package in new software like iLife. But, it's odd that Apple established a $329 price in year one, then went up twelve months later. It had to know Retina was on the road map. Why did it create a bad comparison for itself?