"We believe that the smaller iPad could cannibalize one million regular iPad units in December at a rate of cannibalization at 20 percent. For every five million smaller iPads, you lose one million standard iPads," Gene Munster, an analyst with Piper Jaffray, relayed to AllThingsD.
Munster's estimate is just slightly higher than that of Bill Choi's, an analyst with Janney Montgomery Scott who pegs the iPad Mini cutting into about 15 percent of full size iPad sales.
No matter how you slice it, the iPad Mini is going to eat into Apple's regular iPad sales, the only question is by how much? That's going to depend on a number of factors, starting with price. Right now very little is known about the iPad Mini, other than the fact that it will probably ship with a 7.85-inch display.
The challenge Apple faces is putting out a product that's able to compete in the growing 7-inch tablet category dominated by Android, while at the same time ensuring there's still demand for its 9.7-inch iPad line.