Apple’s massive margin problem: The Mini is going maxi, with 55M sales projected to only 33M iPads

Shipments of 9.7-inch table panels collapsed from 7.4 million in December to just 1.3 million in January, DisplaySearch analyst David Hsieh says, meaning that Apple’s previously intended mix of tablet sales is getting turned on its head.

“Apple had planned to sell 40 million iPad minis (7.9 inch) and 60 million iPads (9.7 inch) in 2013,” Hsieh wrote. “However, the reality seems to be the reverse, as the iPad Mini has been more popular than the iPad.”

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With this utter collapse in the overall market for larger tablet panels, it appears that consumers have turned to smaller hold-in-one-hand tablets, and that Apple’s expected product mix will be hit hard. According to DisplaySearch, that means that Apple will likely sell 55 million iPad Minis and 33 million iPads — less than half of what the company initially planned for 2013.

It’s worth noting that these numbers and projections are not figures that Apple has released but conjectures based on what analysts see of component orders and flow. So some skepticism — and a healthy margin of error — is in order.

But if DisplaySearch is correct, Apple’s total sales will be down as well.

Forty million Minis and 60 million iPads is 100 million, but 55 million plus 33 million is only 88 million … still a huge number, but materially down from 100 million. And the change will also affect Apple’s revenue and gross margins. The Mini is obviously cheaper than regular iPads, by a factor of $150 or so, and it has a lower profit margin as well.

DisplaySearch forecasts 254 million tablet sales in 2013: 136 million small to medium-sized, and 118 million large. If that’s correct, and if Apple sells only 88 million total tablets — or even the 100 million originally forecast — Apple will have lost its sale leadership position in tablets.

All of which makes it ever more imperative that Apple get cracking on new products: Retina iPad Minis, iPhone Minis, a full-size iPad 5 that is lighter and thinner and counteracts the sales trend to smaller devices, and perhaps even the long-rumored iWatch.

Or, better yet, something truly innovative.

That’s what Apple has consistently done in the past, as CEO Tim Cook recently said: obsolete its old products with newer, higher-margin products.

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If that’s going to happen in 2013, we need to see some of that Cook’s cooking, soon.