This model of Air is obviously a transition product with new guts in an old shell. I suspect that as Apple introduce fully redesigned, second generation Apple Silicon products, you might see something that is closer to the 12” MacBook.
It'd be amazing if they managed to squeeze a 13" screen into the old 12" form factor - you'd still get great battery life thanks to the M1.
However the interesting part would be what are they gonna do with their iPad Pro line at this point I don't see a reason for it not to run Big Sur or the Bigger Sur they'll release next year and compete directly with the surface.
What I see Apple doing is the following:
iPhone/iPad non-pro continuing to use A series SoCs and run iOS
iPad Pro migrate to M series SoCs and become what is essentially Apple's Surface Pro
Macbook Air 13" and 11" (possibly drop to a single 12" model) with M series SoCs this essentially will be the Surface Laptop/Book competitor
Macbook Pro's will continue as they are 13" and 16" models, if Apple goes for 11" and 13" MBAs they might move the MBP to 14" and 16".
Without discrete GPUs and essentially no way to "upgrade" the CPU to a higher model I don't really see the MBP 13" being viable in the long term tbh, I think they'll need a model that will differentiate it much more from the MBA and unless Apple starts binning their future M series SoCs much more in line with Intel and AMD I don't see them having too much of a range here for upgrades.
So alternatively I also see them dropping the 13" MBP altogether and having only a 15" or 16" on whilst the Air will occupy the smaller form factors.
But it's hard not to see some sort of convergence between mobile, laptops, and desktops over time.
Based on the data I've seen so far, I'm not sure why they even did a with fan Pro variant. Even if the market for an 11-12" model is smaller I'm not sure why they didn't do that instead. I was sure that was going to be the reason they didn't refresh their 12" Intel system.
The ‘pro’ variant released was the low-end 13, aka the 2 port, formerly the ‘macbook escape’. The 13” line has been bifurcated since 2016, with this one firmly lower-spec’d and powered.
It’s very likely that the ‘4 port’, or high-end 13” pro will make more use of the active cooling, so it was likely worth it to develop the new laptop with it.
I had the 12” MacBook for a couple years and the form factor was amazing. I backpacked around the world with it. But it was so underpowered, it was barely useful. I found myself using my phone more and more because it was less frustrating. I would love to see what an M1-powered 12” MacBook could be like!
But like you said, likely would eat into the iPad market - on the other side, as long as they don't make it a 2-in-1, the iPad should still have more than enough reason to exist.