Was This Steve Jobs' Biggest Mistake?

Let's face it: Steve Jobs was wrong. The Apple (NASDAQ: AAPL  ) co-founder famously bashed smaller tablet form factors in 2010, saying that a 10-inch device was the perfect size. Then Apple launched the iPad Mini two and a half years later, and now the product family will never be the same.

Consumer demand has been quickly shifting toward smaller form factors, starting most notably with Amazon.com's (NASDAQ: AMZN  ) Kindle Fire lineup. The e-tail giant was able to rank No. 3 in the tablet market in the fourth quarter with an estimated 6 million units shipped, and the company's larger model doesn't seem to have been selling particularly well.

Thanks to that transition, larger display panel shipments throughout the industry are getting eaten alive.

Paint me a picture
NPD DisplaySearch recently released some estimates on tablet panel shipments in January, and the data shows a precipitous drop in larger sizes (9 inches and above) accompanied by an increase in smaller sizes (7 to 8.9 inches). The total market decreased sequentially from December, which is expected because of seasonal patterns.

Tablet PC Panel Shipment in Dec.'12 and Jan'13 (Million units). Source: NPD DisplaySearch.

Shipments of 9.7-inch panels fell dramatically from 7.4 million in December to 1.3 million January -- an 82% drop off. Of course, that size panel is primarily the full-sized iPad. Within the larger segment, the 10.6-inch display is predominantly Microsoft (NASDAQ: MSFT  ) Surface (both RT and Pro models). Those shipments went up slightly, which is expected since the software giant just recently launched the Pro model while yesterday announced it was expanding international availability of the RT model.

Paint me some bigger pictures
It would seem that all the reports that Apple is cutting panel orders have some legs after all. The iPad maker reportedly reduced 9.7-inch panel orders from LG Display (NYSE: LPL  ) by 90% in January to just 600,000, while Sharp has nearly halted production of that size also.

Both Tim Cook and I have warned investors about reading too deeply into individual data points related to Apple's supply chain, since they can't accurately paint a bigger picture. That being said, DisplaySearch does detail its estimates on Apple's production plans for the year, and the researcher believes that Apple has reduced its overall iPad build plans amid a shift toward the iPad Mini.

Source: NPD DisplaySearch.

In December, the researcher estimated that Apple was planning to ship 100 million total iPad units in 2013, a figure that's now been reduced to 88 million units. Since DisplaySearch keeps its fingers on the broader display industry's pulse, this estimate may be more meaningful than reported order activity at any single supplier.

Sources: Apple and NPD DisplaySearch.

Possible reduction notwithstanding, shipping 88 million tablets in 2013 would still be quite a respectable feat and would represent 34% unit growth from the 65.7 million iPads sold in 2012. The shift in product mix will inevitably have downward pressure on average selling prices, a trend that began last quarter.

Initial estimates also showed that the iPad Mini carried a higher hardware gross margin than the larger model, which is just another reason investors shouldn't be overly concerned with cannibalization. Time and time again, Apple has reiterated its philosophy that it doesn't worry about cannibalism. Tim Cook recently expressed his belief that if a company uses that fear as a major consideration in what products to pursue, it signals the beginning of the end. So long as Apple can continue churning out products that consumers line up for, the rest will take care of itself.

Steve Jobs' biggest mistake?
DisplaySearch estimates that the total panel market will jump from 160 million in 2012 to 254 million in 2013, with more than half of those displays going toward smaller devices. There are numerous examples of Steve Jobs' being wrong, but this one might have been his biggest mistake.

At this point, investors can't help wondering what could have been like if Apple had started with the 7.9-inch form factor and expanded up. Rivals would have never even had a chance.

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Read/Post Comments (25) | Recommend This Article (22)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 02, 2013, at 7:53 PM, HanSoLow wrote:

    A very successful product will almost always attract hungry rivals.

  • Report this Comment On March 02, 2013, at 7:56 PM, twolf2919 wrote:

    Yes, the iPad mini is selling better now than the original iPad. But it does not necessarily follow that Steve Jobs was wrong when he said that the 10-inch form factor was the perfect size. It may still be true that the 10-inch form factor is the perfect size, but that people can't afford or are willing to spend the $499 this perfect size currently requires - so they go for the less-than-perfect, but at least still Apple-quality $329 iPad mini. It could also be that although 10-inch is the perfect size, 1.46lb may not be the perfect weight! The iPad mini weighs much less than this and is, therefore, easier to handle for long periods of time.

    Apple is going to be coming out with the iPad 5 soon. Supposedly it will be much more svelte than the current generation. The mini, in turn, will supposedly acquire the Retina display - which might increase its weight a little. If the gap in sales between the two devices - and the prices stay the same, that might suggest that, all other things being "equal", people do prefer the 10-inch display!

  • Report this Comment On March 02, 2013, at 8:26 PM, rjo3491 wrote:

    His biggest mistake? Trying to think his cancer away for nine months.

  • Report this Comment On March 02, 2013, at 9:14 PM, SandyQi wrote:

    This is not the end. Time is needed to prove it.

  • Report this Comment On March 02, 2013, at 9:25 PM, SrikanthN wrote:

    no it isnt.. if ipad mini wasnt there, that "eat into share" would have been done by some other tablet priced similar to mini... the buyers perception and judgement of apt price that could have been declining...

  • Report this Comment On March 02, 2013, at 9:27 PM, eidsonb wrote:

    And it will still be the same OS...old and Stale...Apple no longer innovates...new bells and whistles....

  • Report this Comment On March 02, 2013, at 9:59 PM, cerberus39 wrote:

    Seriously, I wish my biggest mistake made me millions of dollars

  • Report this Comment On March 02, 2013, at 10:07 PM, sbmhome2 wrote:

    @twolf2919

    I agree with what you said 100%.

    Lots of things are good and one time and not so good at another.

    Maybe if ipad mini came out first it would have flopped.

    I truly think that the iPad mini refined the iPad hardware and at a lower price.

    Once the iPad 5 comes out, it will take cues from the iPad mini which should help it sell more.

  • Report this Comment On March 02, 2013, at 10:34 PM, TimKnows wrote:

    Steve Jobs biggest mistake is not developing an OS to replace that boring i OS. The company will be crushed because of this.

  • Report this Comment On March 02, 2013, at 10:42 PM, Gary03mw wrote:

    Small tablets sell on price. Not because they are necessarily better. If the mini sported the same price tag as the regular sized iPad I think we'd see the regular sized version selling significantly more.

  • Report this Comment On March 02, 2013, at 10:44 PM, wkl8261 wrote:

    ipad is a over priced waste of cash, would rather buy a $350 laptop

  • Report this Comment On March 02, 2013, at 11:11 PM, Torres88 wrote:

    ya

  • Report this Comment On March 03, 2013, at 2:28 AM, caricamento wrote:

    The iPad was correctly sized when there was nothing comparable on the market, then proceeded to smash expectations.

    Any manufacturer worth its salt can provide computing power with a smaller screen. The iPad broke headfirst for a laptop market disruption - forcing Microsoft to play catch-up now, and weakly at that - while proving that consumers would demand a sweeter form factor and price at the expense of functionality.

    If Steve had introduced a 7-inch iPad, every other company would have introduced a super-7 class tablet at a similar price point right away. They couldn't, because Apple was tooled for a fight. Steve was glass-obsessed and had no qualms about pushing the envelope. He utilized Apple's halo effect/cash wisely.

  • Report this Comment On March 03, 2013, at 4:09 AM, morgan359 wrote:

    Steve was the hype machine. he told people what they liked and they did. even if he thought the mini was a good idea he would say it was bad to pump the current product. if he were still hear he would have gotten on stage and said how we took perfection and made it better or smaller to hype the mini. not a mistake just timing.

  • Report this Comment On March 03, 2013, at 6:42 AM, tofudude2013 wrote:

    Why in the world are people so caught up in the myth of Steve Jobs that they can't accept that perhaps (yes, perhaps. We have no proof either way) Steve Jobs was wrong about something. He was a human being. Maybe it would be more respectful to treat him as a person and not a myth.

  • Report this Comment On March 03, 2013, at 6:50 AM, dongyang2001 wrote:

    Yes!

  • Report this Comment On March 03, 2013, at 6:59 AM, dongyang2001 wrote:

    I have both the original Ipad and the Mini Ipad.

    The larger one is just too damn bulky and was too heavy to really carry around and use. It was a gift, and I wish the gift giver would have waited a few months and saved her money. Now it basically sits on a shelf collecting dust. Not only that, there is something wrong with it, because I cannot charge the device.

    The mini was a present from my wife. I love the mini Ipad because it is small, very lightweight and can even fit in some of my pants pockets. No charging issues. Great games on it also. I also have an Apple phone that is really incredible, technology I have been waiting for a long time.

    My advice would be to try to see what the various manufacturers are going to come up with, so you are not stuck with a $400 USD device that is already obsolete.

    I love the internet and to be able to whip out something from my back pocket to use for internet is really remarkable. Hard to imagine back in like 2000, that this technology would be possible, makes me think what is going to be out there in the next 10, 15, 20 years.

  • Report this Comment On March 03, 2013, at 7:03 AM, butthead2u wrote:

    Steve's biggest mistake is keeping Apple"s software tied to Apple's hardware and he made the same mistake twice; Microsoft won the first time in the 90's and now they're going to do it again by the end of this decade.

    Why would you not open it to all form factors after getting beat by the PC the first time? It has allowed Android to expand and left the door open for Microsoft.

    By the way, of course you don't come out and say a 7" tablet is the best size when you're trying to maximize profits, I'm sure they had considered size before bringing out what they did. And you certainly don't let the competition know your plans.

  • Report this Comment On March 03, 2013, at 8:22 AM, Stocktonator wrote:

    I agree with Butthead. When I see all the new Ultrabooks coming out from Dell, Samsung, Toshiba, Microsoft, Intel, etc I see the beginning of the end for Apple's dominance. My wife and I each bought iPads but they quickly became toys for the kids. You can only consume content on an iPad.

    We've since bought an Ultrabook from Dell and a Surface Pro from Microsoft. With a full version of Windows you can CREATE content. She updates her blog and edits videos while I use a VPN with the office to update Quickbooks, create Powerpoints and spreadsheets, and yet we can still play Angry Birds when we want also. We tried these things on iPads and gave up real quick. The size and weight of these others need to come down a little, and they will, but they're already way more svelte than a laptop and the touch screen is invaluable. Granted, they're also double the price of iPads, but that will also come down over time.

    Jobs was a genius for coming up with the iPhone/iPad and Apple has made a fortune on it already, but the future, as with PCs in the 80's and 90's, belongs to Apple's rivals that don't to hold you hostage in their system and allows so many different products to be made.

  • Report this Comment On March 03, 2013, at 9:05 AM, iyamwudiyam wrote:

    There is nothing wrong with offering product choices into the marketplace, as long as they meet the company's profitability objectives.

    Improvise, adapt and overcome, this is a marathon, not a sprint, and AAPL has the resources to run a winning race, short-term obstacles notwithstanding..

  • Report this Comment On March 03, 2013, at 10:30 AM, cyclin72 wrote:

    You also have to factor in age. Parents are buying the smaller devices for children because of the perfect fit and price. For an adult, yes a 10" is perfect. But most parents are allowing their children to keep up with the Jones'.

  • Report this Comment On March 03, 2013, at 1:15 PM, RMengineer wrote:

    Some people comment that 10" is the perfect size but that it's too expensive. It is that the mini is less expensive that makes it so popular rather than being a better size.

    But think about this: what makes a product a "perfect" product? If a perfect product is prohibitively expensive as a result of it's perfection, can it still be said to be perfect? To was philosophical, what is the purpose of _any_ product? Products are created and sold and _bought_ in order to somehow enhance or improve the life of that consumer in some way that they would not otherwise benefit but for that product. If a "perfect" product is prohibitively expensive making it unobtainable as a result, then how are people to benefit from it? It may be "perfect" but if no one benefits because they simply cannot afford it, then they aren't benefiting from the product and the product is a "failure" in that regard regardless of how "perfect" it may be. With the fatal flaw that people simply can't benefit from it because they can't afford, how can it be said to be "perfect" when it benefits no one? Ability to obtain the product (price/affordability) is every bit as key a factor in how "perfect" a product is.

    So if the iPad Mini means that more people can benefit from that product than the "full size" model, then it would seem as a product that benefits consumers, the mini is more perfect than the "full size" as the mini allows more people to benefit. That is, it is a "more perfect product" in the ability to add benefit to more consumers.

    Philosophically, the "perfect" product is not the one with "perfect" specs, but the one that does the best job of extending a benefit to consumers. And that may not be the one with the best specs, but the one that makes utility more accessible and available, even with inferior specs. A "superior" spec that does not benefit consumers because consumers cannot access it affordably is actually inferior to an "inferior" spec that actually leverages benefits to consumers.

  • Report this Comment On March 03, 2013, at 1:35 PM, RMengineer wrote:

    I think the mistake is the hubris to think that what defines "perfect" is what the producer decrees to be "perfect" rather than what the consumer ultimately finds to be perfect. Ultimately, the consumer is going to decide for themselves what is the "perfect" product, or in this case, what is the "perfect" screen size. And given an array of options (or perhaps more accurately, a constellation of options of sizes, features, capabilities, and PRICE), the consumer will decide which of the available options is the most "perfect" for them to buy.

    No consumer is going to choose to buy a less perfect product when a more perfect product, in their opinion, is available and _obtainable_.

    It is somewhat erroneous to isolate on feature and claim it to be "perfect" or not. The goal of a business should be to develop and offer the product that is most perfect in the eyes of the consumer, not your own eyes. The consumer is the one buying your product, not you. The consumer is the one you have to convince to buy your product over some other product - that's how you make money. If you produce what you think is the "perfect" product but is actually less perfect than other offerings on the market in the eyes of the consumer, who's product is the consumer going to buy? If the consumer thinks some other product is more "perfect" for their needs, for _whatever_ reasons the _consumer_ has, that's not conducive to getting the consumer to choose your product, no matter how much you protest that yours is the "perfect" product.

    That was Steve Job's mistake. Obviously it was not a fatal mistake and they have done very well. But how much more could they have sold, how much more profit could they have made, how much more of the market could they have locked up if they listened to what consumers said was the "perfect" screen size (sooner) rather than trying to dictate what Jobs said was perfect in an environment where there are competitors willing to give the consumer what _they_ think, for whatever reasons, is the "perfect" screen size?

  • Report this Comment On March 03, 2013, at 1:44 PM, RMengineer wrote:

    I don't think there is one "perfect" size. I see many sizes as being "perfect" for different was of using the product. Which size is "perfect" then depends on, among other things, how you plan to use it.

    I have a 4.7" phone, a 7" tablet, a laptop, and a desktop. And I could see a desire to _also_ have a 10" tablet.

    I chose the 7" tablet for a number of reasons. I plan to use it principally out and about - so portability not is important while providing a reasonably large screen is paramount. And that it was very inexpensive helped a lot. Actually I think I would prefer an 8" screen, but at the time there was not much available - the choice was either 7" or 10". 10" is just too big and cumbersome for what I wanted.

    Now, at home, I would like to have a 10" tablet. Or maybe even 12". But for me, the utility vs price has not yet reached a point where I would get one.

    The point being is that there really isn't one "perfect" size but many "perfect" sizes depending on what any given consumer wants/needs for how they plan to use it. Any one who would proclaim there is some cosmically "perfect" size is probably just narcissistic. Infer from that what you will vis a vis Steve Jobs.

  • Report this Comment On March 04, 2013, at 9:12 PM, iSee2 wrote:

    Is there any limit to the silly things people will write about Apple?

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