Is it possible to change the microphone sensitivity (input volume) on the iPad?
If so, how?
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What you can do with the built-in microphone is limited. You should investigate purchasing a third-party microphone, or better yet an audio interface with a microphone preamplifier, into which you plug a microphone. This will cost money but give you much more control.
Yes, it is possible to change the microphone sensitivity system wide on the iPad 2 and above, but only for external mics, as far as I know.
To adjust the audio input level you need two things:
In the voice recording section of GarageBand, select the button with the audio plug. With a supported device you should see the audio-input level slider and other extra settings like a monitor switch. The microphone input level adjusted in GarageBand, works system wide.
Depending of the amount of current you USB-mic needs, it could be that the iPad cannot deliver sufficient energy to power the mic. In that case you can use the Griffin iMic, or a powered USB hub. My Samson C01U works perfectly without any additional power requirements.