Then Apple came out with the iPod mini, which later became the iPod nano, capturing another segment of the market. That release was followed up by the iPod shuffle, again capturing another segment of the market.
It was changes in technologies that allowed these products to be released, but I believe Apple had planned the releases all along.
When you look at a 7-inch iPad, or any other Apple product, don’t look at how it affects its competitors, but rather how it fits into Apple’s product strategy. Doing that will make things a lot clearer.
Sounds to me like the iPad family is going to grow by getting smaller.