Why Apple’s (AAPL) iPad Mini Costs So Much?

iPad Mini’s $329 starting price tag, which is a full $130 higher than the direct competition, was a disappointment for Apple (AAPL) fans as well as many consumers who hoped Apple would price the 7.9-inch 16GB gadget somewhere between $249 and $299 to stay competitive. Apple marketing chief Phil Schiller defended the price and rejected suggestions the new iPad is too expensive to compete with rivals products like Google (GOOG) Nexus 7 and Amazon (AMZN)’s Kindle Fire series, saying consumers will pay for a quality product. Schiller is right. Even at $329 Apple’s new diminutive tablet is expected to be hugely popular and will probably blow its rivals out of the water, but the real reason why Apple decided to put such a high price tag on the iPad Mini might have a lot more to do, at least for the time-being, with problems manufacturing the gadget’s touch screen. According to Siu Han and Alex Wolfgram at DigiTimes, Apple can’t get enough 7.9-inch screens for the new iPad Mini, and the ones it can get are pricey. “The $329 price tag for Apple’s iPad Mini is largely due to low yield rates for the product’s GF2 (DITO film) touch screen technology,” DigiTimes says in its report, adding “the DITO film sensor is having mass production issues, which has been a big contributor to why the device is approximately 40-50% more expensive compared to other 7-inch tablets that have OGS or G/G structures.” Digitimes also reports that according to industry sources, the GF2 iPad Mini touch screen modules are only about $5 cheaper that those on the 9.7-inch model iPads. The lower margins on the iPad Mini, which at 7.9 inches, it’s as thin as a pencil and lighter than a pad of paper, could explain Apple’s forced decision to price the latest iPad higher than expected. I say ‘forced’ because by aggressively pricing its new product higher, Cupertino is actually protecting its profit margin by trying to control demand. In their report Digitimes also claims that the iPad 2 orders have a visibility until as late as the first quarter of fiscal 2013, thanks to the device maintaining steady sales.