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Did You Miss Apple's Brilliant Move?

When Apple (NASDAQ: AAPL  ) launched the iPhone 5s last year, one of the key differentiating features was the integrated fingerprint reader known as Touch ID. Much to the disappointment of many Apple customers, the iPad Air and the iPad mini with Retina display that launched following the iPhone 5s didn't sport Touch ID. But this year's iPads should pack this key feature. Here's why Apple was absolutely brilliant for putting off Touch ID for iPad until 2014.

The party line: cost
Back in 2013, one of the key concerns surrounding Apple's Touch ID was that it was difficult to get these touch sensors to yield well. Of course, as Apple and its foundry partner (in this case, Taiwan Semiconductor (NYSE: TSM  ) is cited as the manufacturer of Touch ID) learn how to build these things better, the yields go up, and the cost per unit comes down.

This is a plausible explanation, and it is very likely that it was one of the key driving factors behind the deferral of Touch ID for iPad until the 2014 models, but there's another reason that Apple likely wanted to hold off that makes even more sense in the context of the current competitive environment.

Last year's iPad Air could get a price cut
For the longest time, Apple continued to sell the iPad 2 as the "cheaper" iPad option below the flagship. The differences between the iPad 2 at $399 and the iPad 4 or iPad Air at $499 were staggering and likely enough to get customers to cough up the extra $100 for the sake of longevity.

When Apple releases the next generation iPad Air this year, it will likely look very similar to this year's iPad Air, perhaps with a few tweaks to the industrial design here and there. Internally, one should expect that the next generation iPad Air should be much faster, but the difference that will have a big impact on usability will be the Touch ID.

Indeed, as iOS 8 now exposes Touch ID via an API to app developers, the uses for Touch ID across a multitude of apps are set to explode, and an iOS device without Touch ID will feel distinctly lacking from one with Touch ID. The bet here seems to be that when customers are faced with the choice between today's iPad Air at $399 and tomorrow's at $499, that $100 won't seem like much for better performance and tangible improvements in functionality.

This makes Apple more competitive
If Apple does waterfall this year's iPad Air to the $399 spot, this will still be a very competitive device with the Android/Windows devices in that same price range from a total user experience standpoint. The industrial design is still superb, the performance is nothing to sneeze at, and the Apple software ecosystem (particularly for tablet-specific applications) is still unmatched.

With a very competitive product in the $399 spot (unlike today where the fourth generation iPad simply looks outdated compared to many Android tablets in that price range) and an extremely competitive product starting at $499, Apple could actually see a nice jolt to its iPad business.

Foolish bottom line
By putting off Touch ID for the iPad until this year, Apple was able to ensure that it could waterfall a strong product to the $399 price point while still having an obvious differentiating factor to try to upsell customers to the $499 flagship. This looks like a great business move from Apple, and given how savvy the company's management team has shown that it is time and again, it is unlikely that this is a mere coincidence.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

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  • Report this Comment On June 25, 2014, at 1:05 PM, JaanS wrote:

    Good article, but I think you left out one other reason. Decisions such as this are not often made for just one.

    This is that when the 5s was released, TouchID was untested "in the wild." I am sure that that - along with yields - was part of the equation. Release in relatively limited edition until tested. That way, if there are serious problems they will be limited in scope.

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Ashraf Eassa

Ashraf Eassa is a technology specialist with The Motley Fool. He writes mostly about technology stocks, but is especially interested in anything related to chips -- the semiconductor kind, that is. Follow him on Twitter:

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