Does Apple Need a Low-End Tablet?

For years we’ve talked about the possibility of a lower cost “iPhone Nano” to compliment Apple’s flagship handset. It was argued that the cheaper device would help the Cupertino company address the low-end market, and make inroads with prepaid customers.

Although the rumored Nano wasn’t announced at Apple’s iPhone event last month, Tim Cook’s team did introduce two low-cost handsets: the $99 8GB iPhone 4, and the free iPhone 3GS. The company now covers nearly every smartphone price point possible…

Apple seems to be confident that the move will pay off, considering Tim Cook just forecasted a $40 billion dollar Q4. But with reports coming in that demand for the iPad 2 is dwindling, you have to wonder if Apple’s tablet line is in need of a similar adrenaline shot.

Not only is the slate up against a struggling economy this holiday season, but it also faces some stiff competition. As most of you know, Amazon just released its popular Kindle Fire. And although it’s no iPad-killer, it’s a good $300 dollars cheaper than Apple’s tablet.

So what does Apple do to maintain its dominance in an increasingly competitive tablet market? Some pundits have suggested that, as it did with its iPod line, Apple create different versions of the iPad. For instance a smaller, less expensive model. It’s possible.

In fact there’s a rumor going around that Apple just ordered a batch of 7 inch displays from LG for a smaller iPad. Admittedly, if the company could outfit the device with a Retina display, an A5 processor, and drop its price a bit, it could really be onto something.

But the alternative (and more likely) route to creating an all-new slate would be similar to the road that Apple recently took with its iPhone line. When it introduces the new version of its tablet next year, Apple could simply keep the iPad 2 around at a discounted price.

Imagine a $399, or even a $329, iPad 2. That would give consumers that are considering a $200 tablet like the Kindle Fire a lot more to think about. But will that be enough to keep Apple competitive? Or does Apple really need a whole new slate to stay on top?