Analyst: Apple to skip iPad mini in 2012, keep low-cost iPad 2 instead

Apple’s (s aapl) plans for a 7-inch iPad are a very hot topic heading into the new year, but they may not bear any tangible fruit for consumers in 2012. Wedge Partners analyst Brian Blair told AllThingsD he doesn’t think it’s in the cards, even though Apple definitely seems to have been testing the idea.

The 7-inch iPad has been in testing at Apple for “over a year,” according to what Blair told AllThingsD’s John Paczkowski, but the firm doesn’t expect the company to release anything for the public based on that design in 2012. That runs contrary to reports we have heard earlier, including one from last week that suggested a 7.85-inch device was set for a late 2012 introduction, based on supply chain information.

My colleague Kevin Tofel suggested that there were good reasons to believe a smaller iPad could indeed be on the way; these include portability, credible competition in that space, dwindling iPod touch sales and a lower price point. Blair thinks that price is the main issue Apple actually has to address in terms of keeping the competition in check, and he suggests that Apple can work on that element without compromising on a screen “too small to express the software,” as Jobs had described the 7-inch form factor.

Instead, Wedge Partners sees Apple’s keeping the iPad 2 as part of its lineup following the introduction of an iPad 3 and just dropping the price of the iPad 2. It’s a strategy we have seen Apple use with the iPhone; it keeps the previous-generation device available as a lower-cost option, and with the iPhone 4S launch, it even kept the iPhone from two models ago, which can be had for free with a contract in the U.S.

Obviously Apple didn’t do this with the original iPad as a low-cost alternative to the iPad 2 this year when the newer tablet was introduced, but the situation has changed. When the iPad 2 came out, there was no tablet competitor that posed any real threat to Apple’s dominance. Now the Kindle Fire (s amzn) appears to be doing well, and Apple has to consider that others will join it and Barnes & Noble (s bks) with an end run at the low end of the market. Also, the iPad 2 offered relatively little in terms of big splashy changes over the original; if an iPad 3 comes packing a Retina Display, as rumors suggest, it should be a big-enough upgrade to allow the iPad 2 to remain on sale without drawing too many sales away from the newer device. This is especially true if Apple cuts the storage on the older device to 8 GB, as it has traditionally done with older iPhones.

A cheaper iPad 2 alongside the iPad 3 is a way for Apple to have its cake and eat it too. It can press the advantages of a larger screen while also competing on price, which would work well from a marketing perspective (“Bigger is better, but not more expensive”). We will have to wait and see to find out what Apple actually does, but Blair’s thinking makes an awful lot of sense to this Apple watcher.