Apple finally unveiled the iPad mini this past Tuesday, ending months of speculation surrounding the device, and so far, reactions have been mixed.

In many ways, the iPad mini is exactly the device we were expecting; a 7.9-inch tablet with the same 1024 x 768 screen resolution as the iPad 2, packing Apple’s A5 processor in a smaller, thinner design. While no one can say they were shocked by the iPad mini itself, Apple still managed to surprise with a $329 price tag, a price which many consider to be too high.

The problem with that logic is that it stems from a direct comparison between the iPad mini and other “7-inch” tablets like the Nexus 7 and Kindle Fire HD. That’s a problem because Apple doesn’t consider the iPad mini to be on the same level as these tablets. They’ve placed it in a class of its own. In fact, during Apple’s earnings call yesterday, Cook even said the iPad mini is “in a whole different league”.

And it’s not hard to see that when looking at the iPad mini.

The hardware is, in typical Apple fashion, cutting edge and high end. Like every other product in Apple’s lineup, the iPad mini is made from aluminum and glass, with the same precision and attention to detail consumers have come to expect. As Joshua Topolsky at The Verge put it, compared to the iPad mini, the Nexus 7 and Kindle Fire feel like toys.

Perhaps even more important is the iPad mini’s display, which at 7.9-inches makes it more of an 8-inch tablet. This is a key hardware differentiator for Apple. Steve Jobs had said in the past that 7-inch tablets were too small to use, so Apple had to figure out a way to circumvent that problem. They’ve done that with the iPad mini, creating a device that is just as small and portable, not to mention thinner and lighter than the Nexus 7.

Apple is also banking on their ecosystem to sell the iPad mini, a bet they can be sure will pay off. Phil Schiller spent a good portion of Tuesday’s event comparing the app experience on the iPad mini to the Nexus 7, showing what stretched out phone apps look like next to iPad apps. There’s no denying that Google Play is sorely lacking in tablet-optimized apps, and there are no signs that this is changing any time soon. For whatever reason, developers aren’t making tablet apps for Android, and this gives Apple a huge advantage. Consumers love apps. It sounds silly, but it’s true. That is why they buy iOS devices, and that is why they will buy the iPad mini over a Nexus 7.

Those two key differences - the hardware and the ecosystem - entirely justify the price of the iPad mini. I can only attribute the disappointment at the iPad mini’s price to sticker shock, because I can’t see how it is overpriced. Of course it would have been nice to see the iPad mini at $299, or even $249, and Apple could afford to do that, but they don’t need to. While Google and Amazon chose to go after Apple by practically giving their devices away, Apple chose to let the device and the apps speak for themselves, and the price reflects that.

Think about this for a second: the difference between a Nexus 7 and an iPad used to be $300. Thanks to the iPad mini, that difference is now just $130, and for that you get a much higher quality device and a diverse library of over 275,000 iPad-specific apps. Those are things that customers care about, and you can bet that is how Apple plans to lure consumers away from the Nexus 7 and Kindle Fire, and toward the iPad mini.

The truth is that consumers don’t want tablets. They want iPads. Look at Apple’s tablet marketshare if you need proof of that. Just as no competitor could defeat the iPod, it’s looking like no one will be able to dethrone the iPad, either.

With the iPad mini, Apple has filled the last remaining gap in their iOS line. Competitors should be worried.

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