4 reasons Apple should make a 7-inch iPad

News of a rumored smaller iPad made the rounds on Friday as Asian supply channels indicate a 7.85-inch Apple tablet will arrive in late 2012. Apple(s aapl) essentially owns the consumer tablet market at this point, outselling all Android(s goog) tablets combined by a sizable factor, depending on the sales numbers you look at. With such success for the iPad already, why should Apple even bother with a smaller slate?

There are several reason to consider such a device, even with the iPad as the top tablet. Let me preface those reasons with a baseline thought, however: I’m not suggesting the iPad isn’t a great tablet in its current form. It’s a breakthrough product that has created demand for a market that hasn’t had any since the first tablet PC was introduced in 2001. I have an iPad 2, and it offers a superb experience, but in a limited fashion. That leads me to the first of my reasons:

1. Smaller tablets are more portable

While I like and use an iPad, I actually use smaller tablets more often and in wider range of places. I pointed this out in January, when I actually dumped the original iPad and explained why. I had just purchased a 7-inch Galaxy Tab a month prior and found I was taking the Tab everywhere. The iPad? Not so much. When I was sitting around the house or planning to be immobile at a Starbucks(s sbux), for example, the iPad fit the bill. But when moving around, the 7-inch Tab was the go-to device. That Galaxy Tab fits in a purse, a back pocket or inside jacket pocket as well while the iPad doesn’t. That smaller size equates to a lighter weight, too: You can comfortably hold a smaller tablet far longer than a larger one.

2. Credible 7-inch tablets are appearing

Although I still use my Galaxy Tab daily, it really hasn’t been a tremendous seller when compared to the iPad. But in the year I’ve had the Tab, some credible 7-inch alternatives have been selling well. Specifically, the Barnes & Noble(s bks) Nook Color from last year and the more recent Nook Tablet, plus Amazon’s (s AMZN) Kindle Fire are all hot holiday items. The portability factor is one reason, I think, but more importantly is the price point: All three of these are available for $199 to $249. As I alluded in my Kindle Fire review, you’re getting a device that does 80 percent of what an iPad can do, but at 40 percent of the price. Will Apple simply cede this market segment to Barnes & Noble, Amazon and others? I’m doubtful.

3. With iPhone sales rising, the iPod touch has limited appeal

One of the oft-quoted reasons against a smaller iPad is the existence of the iPod touch. I do agree with that thought, but in actuality, it’s part of the reason Apple should make a smaller iPad. Why? iPod touch sales are likely to decline over time as more people buy smartphones and as Apple adds more carrier partnerships. I used an iPod touch to supplement an Android phone last year, but how many people will buy an iPod touch to supplement an iPhone? Fewer and fewer as time goes on. And recently, Apple hasn’t invested much effort in advancing the iPod touch. This year’s “refresh” was the availability of white iPod touch. To me, that’s a sign of iPod touch’s demise as a product line, which leads to the final point.

4. A smaller iPad would cost less and fit the iPod touch price point

If Apple does eventually shelve the iPod touch, it wouldn’t have a connected product in the $199 to $399 price range. Enter the iPad mini slate, which at $199 competes head-on with the Kindle Fire at the same price. Like the iPod touch, and the iPad, for that matter, a smaller $199 iPad would likely be a Wi-Fi device, with the contract-free option of adding 3G support for an additional cost. For those who want the iPad experience, but can’t afford the $499 to $829 entry point, a $199 to $399 iPad mini opens up the doors of accessibility. My guess is Apple pricing would follow that of the iPod touch, with extra cost attributed to greater flash storage capacity.

Again, my calling for a smaller iPad doesn’t mean the current model is any way bad; growing sales figures show Apple has a clear hit on its hands. But there is room for a smaller model, and if I had to place a guess, I’d say the timing to launch an iPad mini would be at Apple’s traditional September iPod event in 2012. That’s right before the holiday season, and it would be a fitting time to transition the iPod touch to an iPad touch, or whatever Apple wants to name such a product.