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With iPad Air, Apple's 800-pound tablet gorilla returns

Apple wows the crowd with a new design on the iPad that is lighter, thinner, and more powerful. It comes at a time when the market has only gotten more competitive.

Now playing: Watch this: Apple unveils 9.7-inch iPad Air, the thinnest, lightest...

Apple reminded everyone who's on top with the redesigned and appropriately renamed iPad Air.

Unlike last year, where the star of the show was the brand new iPad Mini, Apple went back to the 9.7-inch device that created the mainstream market for tablets. The $499 iPad Air offers a tablet that is 20 percent thinner and 29 percent lighter, while offering up a smaller bezel for an overall sleeker, slimmer design.

James Martin/CNET

"It's the biggest step yet in delivering the vision that is iPad," Philip Schiller, head of marketing for Apple, said during the launch event.

By using the Air name, Apple is copying its MacBook playbook. It's a wise move, as the Air brand has a lot of built-in goodwill thanks to the long-running success of the MacBook Air franchise.

"The new name helps with differentiation and opens up the possibility of a wider portfolio where Air will be the best in class," said Gartner analyst Carolina Milanesi.

A lot has changed since the original iPad debuted. Where Apple once had the entire market for itself, dozens of competitors have sprung up, with many offering worthy alternatives. Smaller tablets such as the Nexus 7 and Kindle Fire HDX 7 -- both equipped with high-definition displays and lower prices -- have made strides in the market.

Microsoft last night launched its Surface 2 and Surface Pro 2, as it continues to tout the benefits of tighter integration with Windows 8 and Windows Phone devices. Earlier this morning at an event in Abu Dhabi, Nokia unveiled its first tablet, the Lumia 2520, a bright and colorful 10-inch tablet that also runs on Windows RT (which Microsoft confusingly now refers to as Windows 8.1).

An update to both the iPad and iPad Mini were badly needed, as Apple has seen its once staggeringly dominant position fall to just a significant lead. Where its iPad once commanded virtually all of the market, during the second quarter of this year it accounted for about a third of the total share, according to IDC. That's a decline from just a tick more than 60 percent from a year ago.

The iPad franchise itself has grown to be the second-most important weapon in Apple's arsenal, second only to the iPhone in terms of unit sales and revenue. While more than half of its revenue comes from the iPhone, 18 percent came from its iPads in the fiscal third quarter. That number is poised to increase as growth in Mac sales continue to decline and competition in the smartphone business rises.

Apple will provide fresh numbers when it reports its fiscal fourth-quarter results on October 28.

Showing the opposite momentum is No. 2 Samsung, which saw its market share more than double to 18 percent from 7.6 percent a year ago, helped by a dizzying array of tablets in all sizes.

But Apple took the time to defend its position. Calling out the doubters, CEO Tim Cook highlighted some of the critical comments made when the original iPad came out, with few convinced it would make much of a dent in the market.

"Now everyone seems to be making a tablet," he said. "Even the doubters are making them."

Cook urged people to ignore things like activations and market share, and argued that usage mattered. He said that the iPad was used more than four times the rest of the tablets combined.

iPad Mini finally gets Retina Display
Disappointingly, the iPad Mini only got a minor update, with the notable addition of a high-definition Retina Display, what the company said was the most requested feature of the device.

Given all the noise about the redesigned iPad Air, the announcement of the iPad Mini, which came right after, felt like a bit of an afterthought.

The company raised the price of the new iPad Mini with Retina, attempting the same tactic that worked on the MacBook Pro with Retina Display. Keeping a foot on the lower end of the market, it lowered the price of the original iPad Mini to $300.

The iPad Mini plays an increasingly critical role in Apple's plans to maintain its leadership position, so it'll be interesting to see how well the price hike for the Retina-enabled iPad Mini is received by consumers. The lower priced Mini helps shield Apple against competition from lower price alternatives from Android, without going too low end. But it also opens Apple up to a new base of customers who prefer the smaller tablet for gaming or portability.

Apple also made the decision to omit the third and fourth-generation iPads, instead sticking with the iPad 2 as its budget 9.7-inch tablet, priced at $399. By keeping the iPad 2 around, it widens the disparity in features between it and the iPad Air, likely spurring consumers to snap up the newer model.

Don't forget the Mac line
Apple, meanwhile, lead off with a review of OS X Mavericks, which includes iOS-like touches like notifications, as well as the on-the-fly allocation of memory and graphics power. The only eye-raising detail: Apple's decision to give away Mavericks to all existing users, a natural end to the declining prices of software updates. The software was made available for download on Tuesday.

It also unveiled an updated 13-inch MacBook Pro Retina Display for $1,300 -- a $300 cut from the previous model-- and a 15-inch MacBook Pro Retina Display for $2000, with each getting $200 haircut, and was made available Tuesday. The super-high-end Mac Pro will sell for $3,000 and will come out by the end of the year.

Following along the broader theme of lower priced or free, Apple also announced that both iWorks would be available for free, and iLife free for anyone who purchased an iOS or OS X device.

The new software, apps, upgrades and price cuts are certainly welcome for Apple's Mac line. But, rightfully so, most of the attention was focused on the tablets.

Apple certainly delivered with the iPad Air.