The US firm remains dominant in the tablet market, but its iPad is facing a new challenge in the shape of upcoming Windows 8-powered slates from Microsoft's Surface range.
Apple is also facing competition from a different end of the market, as cheaper, seven-inch tablets offered by Amazon and, more recently, Google are proving a hit with customers.
Pacific Crest Andy Hargreaves feels that previous speculation about Apple's iPad Mini plans will prove correct, as the small screen tablet will debut in the fourth quarter.
According to TabTimes (via Mashable), Hargreaves said in a research note that the slate will cost just $299 (£199) for the model with 8GB of memory.
"We anticipate an entry-level 7.80-inch iPad with 8GB of NAND capacity to price at $299 with an initial gross margin of 31%," wrote Hargreaves.
Hargreaves said that the arrival of the iPad Mini will most likely cannibalise some sales from the larger screen iPad.
Speaking to CNET, he added that this may prompt Apple to axe the $399 iPad 2 to make way for the iPad Mini.
However, Hargreaves feels that the expected popularity of the small screen tablet will enable Apple to sell 10m of them by the end of the year.
"We estimate Apple will sell 10 million 7.85-inch iPads in FQ1 (Dec. 2012) and 35.2 million in all of F2013," he said.
"Based on estimated component order volume, we believe our iPad Mini unit estimates are well within Apple's production capacity.
"We anticipate 25% cannibalisation of the larger 9.7-inch iPad (for every four 7.85-inch iPads added, we reduced our 9.7-inch iPad estimate by one), so our total F2013 iPad estimate increases to 91.6 million from 65.2 million."
Rumours of a small screen iPad being in the works have accelerated ever since Tim Cook took over as Apple chief executive last year.
His predecessor, the late Apple co-founder Steve Jobs, was famously critical of tablets with smaller screens than the iPad's 9.7 inches, but Cook appears more ready to react to market conditions.
Various reports have suggested that Apple is already testing the iPad Mini, while orders with display manufacturers are said to be at an already advanced stage.
Apple will launch its new iOS 6 operating system in October, when it is also widely expected to unveil a new generation of the iPhone.
It may be that the company introduces the iPad Mini at the same time, or looks to hold a separate event to maximise exposure.
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