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Why Investors Shouldn't Expect a Retina iPad Mini Anytime Soon

By Evan Niu, CFA - Nov 27, 2012 at 6:01PM

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Hopefully, Apple takes the hit.

The display on Apple's ( AAPL 3.55% ) new iPad Mini is the tablet's biggest weakness and most obvious compromise. It's a necessary trade-off to ensure app compatibility with the 275,000 iPad-optimized apps in Apple's catalog, but still one that's hard to ignore. The low-resolution display is an important spec disadvantage that rivals are quick to point out.

Amazon.com's ( AMZN 2.80% ) Kindle Fire HD and Google's ( GOOGL 2.87% ) Nexus 7 both sport relatively envious 1,280 x 800 resolutions on their 7-inch displays, much sharper than the 1,024 x 768 resolution found on the iPad Mini's 7.9-inch display. Amazon made sure to stack up those specs when it posted its battle cry on its home page briefly last month.

Putting a Retina display in the iPad Mini or otherwise improving the panel is an important priority right for Apple to compete. Too bad it might not happen anytime soon.

Who do you believe?
While Piper Jaffray's resident Apple bull Gene Munster thinks that Apple will put a Retina display in the iPad Mini as early as next March, and there are rumors circulating that Apple has already tapped AU Optronics (NYSE: AUO) for the requisite panels, the techies over at Anandtech say not to hold your breath.

The site lays out three scenarios for Apple to achieve "Retina" marketing status, where the iPad maker can claim that the eye can't discern individual pixels at standard viewing distances (which vary by device). Each possibility has its own unique challenges with getting the iPad Mini to Retina territory.

Decisions, decisions
The first would be the method that Apple has traditionally employed thus far, which is doubling both horizontal and vertical pixel dimensions, resulting in four times the number of pixels. The challenge here is that Apple would need to add in a beefier battery and more powerful system-on-a-chip, or SoC, to serve up all those pixels.

When Apple launched the third-generation iPad, one of the device's major improvements under the hood was a 70% increase in battery capacity. Starting this year, full-sized Retina iPads run X-series A chips that feature additional GPU cores to power the extra pixels, which are physically larger than their X-less counterparts.

That's not to say that Apple can't do these things to assemble a Retina iPad Mini, but doing so could potentially boost size and cost, two things that go against what the iPad Mini is all about, especially when it already carries relatively lower gross margins relative to Apple's corporate average.

The second scenario is for Apple to pick a new resolution that has higher pixel density but maintains the same aspect ratio so that existing apps could simply be scaled to function properly. Doing so would require some extra processing legwork to scale properly, which raises performance considerations. The third alternative is similar: Apple could pick a new resolution and change the aspect ratio, similar to what it did by making the iPhone 5 taller.

Take one for the team
This isn't to say that Apple couldn't do any or all of these things in order to deliver a Retina iPad Mini, just that each choice has considerable drawbacks.

If Apple can address the technical challenges in doubling dimensions, then that would be the best for consumers and put the heat on the Kindle Fire HD and Nexus 7. Apple has always maintained iPad price points and it would have to absorb any cost increases associated with going this route, putting downward pressure on margins. The other two scenarios are more cumbersome and seem like more trouble than they're worth.

Hopefully, Apple takes the hit.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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