Both the Wall Street Journal and Bloomberg claim that Apple is working on a smaller, cheaper iPad to compete with Google's $200 Galaxy Nexus tablet. Original iPad mini rumors stated that Apple was planning to launch a 7.85-inch iPad to compete with Amazon's Kindle Fire, but according to “people familiar with the matter” Apple has its sights set on both Google and Amazon.
According to reports, Apple has told component suppliers "to prepare for mass production of the smaller tablet." Bloomberg's unnamed sources said the tablet will probably cost around $200 and be launched this October, the same month Apple is expected to announce their new iPhone.
Sterne Agee analyst Shaw Wu told investors in April that an iPad mini would be "the competition's worst nightmare". Both Google and Amazon are selling their 7-inch tablets at a loss in hopes to monetize advertisers and content sold through Google Play and Amazon.com. Apple releasing a more affordable iPad could signal the end for both the Kindle Fire and Nexus 7. It could also damage the credibility of Google's Android OS.
Google announced the Nexus 7 along with Android 4.1 (Jelly Bean) at its keynote in San Francisco on June 27, 2012. Google is currently accepting pre-orders for a $200 8GB model and $250 16GB model through its Google Play store.