The DigiTimes website today is full of hot rumors. As usual, the sources for the news are Apple's suppliers, and, as usual, it's worth noting that this website's track record for accuracy has been uneven. DigiTimes reported that Apple will announce an 8GB iPad 2 next week that will be priced to compete on the lower end of the market. This would, of course, be in addition to an iPad 3 that's expected. This rumor has been around before, and there is certainly a precedent: Apple has very successfully continued to sell the iPhone 4 and iPhone 3GS at lower prices even as it sells the iPhone 4S.
Then DigiTimes also reported that the 8 GB iPad 2 would be priced in the range of $349-399. The same report said that their sources indicated that Apple would also be coming out with a 7.85-inch iPad priced around $249-299. DigiTimes says that suppliers have already delivered "samples" of the smaller iPad to Apple for verification and that production wouldn't likely begin until the third quarter at the earliest.
If this is true, Apple clearly intends to compete against the Kindle Fire and other devices on the low end of the market. On one hand, this makes sense: offer more choices and a lower-priced model for those who can't afford the $499 base price. But on the other hand, Steve Jobs criticized 7-inch tablets as being "dead on arrival." Also, Apple has been famous for not offering too many options. Research shows that if consumers have too many choices, they tend to buy less, not more. And one reason Apple has been so famously profitable is because of its very narrow product line. In addition, Steve Jobs was typically against coming out with products that would compete with products the company was already offering. Maybe, for example, someone will end up buying the 7.85-inch iPad just because it's available who might otherwise have gone for the more expensive 9.7-inch iPad.
Whatever Apple announces next week, and it will be fun to see, the heaviest betting is on the iPad 3. It's expected to have a 2048 x 1536 retina display — double the pixel density of the iPad 2. This will make for stunning photos and crisp text. However, DigiTimes also reported today that the high-resolution retina displays may be in short supply until the second quarter, and Apple may not be able to meet the initial demand for the new model. Seems like that happens so often with Apple's new gadgets: it took months for the iPad 2 to eventually meet the demand.
While one appeal of the iPad 3 will be the greater resolution (if the rumors are true), one interesting question is whether 1080p video on the iPad will increase the quality — and whether Apple will even make 1080p video available in the iTunes Store. You can read a discussion of this on Macworld. Currently Apple only offers 720p in the iTunes Store, and the article points out that 1080p files would be very large (perhaps 10GB) and would take a lot of bandwidth. And they'd likely be more expensive. Plus, given the small size of the iPad screen, they likely wouldn't look any different from 720p video. Still, given the AirPlay capability of the iPad, 1080p video would likely be of interest to those with TV's that have screens larger than 46 inches, at which point one can start to see a difference.