Thoughts on the rumored 7-inch iPad

It was inevitable that after Google’s Nexus 7 announcement, the “iPad Mini” rumors would start surfacing again. The 7-inch Asus-branded tablet has garnered quite a bit of attention this week.

Apple has long been believed to be working on its own 7-inch slate, with reports coming from both Apple-insiders and news outlets alike that such a product exists. But will we ever see it?

The latest report comes from Pacific Crest‘s Andy Hargreaves. The analyst told investors that his firm believes that Apple is planning to unveil a 7.85-inch iPad this fall.

“We anticipate an entry-level 7.85″ iPad with 8GB of NAND capacity to price at $299 with an initial gross margin of 31%. We estimate Apple will sell 10.0 million 7.85″ iPads in FQ1 (Dec. 2012) and 35.2 million in all F2013. Based on estimated component order volume, we believe our iPad mini unit estimates are well within Apple’s production capacity.”

Rumor or not, releasing an “iPad Mini” right before the holidays would probably do wonders for Apple’s bottom line. Not to mention what it would do for its already-dominant tablet marketshare.

We have a bit of a problem with the $299 price point though. Google is selling its Nexus 7 at just $199, so it seems like Apple would be pricing itself out of the market at $300. Although to be fair, word is that Google is currently losing money on every tablet sold. And that’s just simply not Apple’s style.

But even if we took the competition out of it, would $299 be worth it for a 7-inch tablet? That’s just $200 cheaper than Apple’s 10-inch Retina-display slate. And just $100 cheaper than the iPad 2.

More importantly, where would the iPod touch fit into all of this? The device hasn’t seen an upgrade in almost two years. And last we heard, it was going to be getting the same 4-inch screen upgrade that the iPhone is rumored to receive this fall.

In all reality, Apple wouldn’t need a larger iPod touch and a smaller iPad. You would think that it would either a) make an iPod touch with a larger display (4, maybe 5-inches), or b) scrap the Touch line altogether and make a smaller tablet.

The odds are actually pretty good that Apple has at least one of these products in the oven, and will unveil it alongside the new iPhone in the fall. The question is, which one is it? And which one would you be more likely to buy?