"There's a certain segment of the consumer base where the current iPad is just too big," she said. "And Apple would have the opportunity to dual-sell some people." There are some consumers, she explained, who would like to have multiple tablets, a larger one for around the house and a smaller one to take with them.
But the most important motivation would be to give the company a way to stomp the competition. "Rather than just maintaining their dominance of the tablet market share, a smaller iPad would let them make a move to crush the opposition," said Alexander.
Her reasoning was based on tablet numbers from the fourth quarter of 2011.
During those three months, Apple's share of all tablet unit sales dropped to 57% from the prior quarter's 64% as lower-priced rivals, particularly the Kindle Fire and Barnes and Noble's Nook tablets, sold in volume.
The introduction of the Fire and Nook, especially the former, forced other Android tablet makers to slash prices to move inventory, a strategy Alexander said was unsustainable.
By expanding the iPad line to include a smaller device -- as well as launch an iPad 3 and retain the now-current iPad 2 at a lower price -- Apple would be in position to grow its share, perhaps to the point next year when it could again account for an overwhelming majority of tablets shipped and sold.
"Tablets are replacing PCs for a lot of people, and like success in the PC market, tablet makers need several product families," said Alexander. The addition of an 8-in. iPad would give Apple a "richer product family," she added.
iSuppli believes that Apple will move on an 8-in. iPad in time for the 2012 holiday sales season, a period that brought the company huge success in 2011, when it sold a record 15.4 million iPads, 111% more than the same quarter the year before.
The research firm -- which regularly estimates the BOM, or bill of materials, of future or current electronics products -- has not yet settled on cost projections for a smaller iPad, said Alexander, because the tablet is "vaporware." Instead, it's modeling several possible configurations.
"I'd be surprised if [an 8-in. iPad] came in the same number of models as the [larger] iPad does now," Alexander said. Instead, she would expect Apple to settle on one or two entry-level, lower-priced models, if only to contrast them to the full-sized iPad.
Apple did the same in 2010 when it revamped the MacBook Air line, offering a new lower-priced 11-in. model that is consistently outsold by the larger, more-expensive 13-in. configuration when customers start comparing the two, then end "buying up."