You wouldn’t necessarily. But someone with a feature phone, or cheapest phone available (think about older generations) may want a cheap iPad mini as an ereader/computer substitute. That doesn’t equate to cannibalism, it’s having something on the market for every consumer.
And iPad mini’s have taken a backseat in terms of priority anyway. They’re not burning money in R&D for them, they’re paid for. Keep selling them just like iPods.
I think, and this is just my theory, that Apple’s offerings are equipped and priced in such a way to foster up-selling. You look at a base model, and say “Well, for $100 more I could have bigger screen/better processor/whatever.” Then, for another $100 you could have even more from there. It get’s people to buy mid-tier models instead of base models. To me, that’s good for business, not bad.
But I’m not a bean counter or an MBA, so I don’t know.