Amazon has proven that affordable smaller tablets can sell well, but are they selling well enough to force Apple to change their opinion about 7-inch displays? According to a recent report from the DigiTimes, Apple plans to begin production of a 7.85-inch iPad next year. The smaller tablet, dubbed the "iPad mini," will be available in Q4 of 2012, and the iPad 3 will still launch in February or March of the same year. DigiTimes claims Apple will purchase the 7.85-inch panels from LG Display and AU Optronics, and that production of the new models will begin at the end of the second quarter of 2012.
The success of the Kindle Fire has revived old rumors about a smaller iPad that date as far back as 2010. The Korean Times wrote in November of 2011 that Apple met with LG Display to discuss production of 7-inch displays, and a few analyst have restarted the iPad mini rumor mill this year as well. The device will reportedly feature the same resolution as the iPad 2, and will be Apple's answer to the growing demand for more affordable tablets.
I'm not too convinced Apple is going to jump on the 7-inch tablet bandwagon so soon. Analyst made the same predictions about the iPhone in 2011, insisting Apple would release a new affordable handset alongside the iPhone 5 to attract customers on a budget. Most likely Apple will follow the same pattern with the iPad as it did with iPhone 3GS, by reducing the price of the original iPad when the next generation device is released. Apple doesn't have to flood the market with "mini" versions of their products to attract new customers, and I don't see them folding to the pressure to do so anytime in the near future.