Apple is set to launch a 7.85-inch iPad 3 by September according to sources in the supply chain quoted by Max Wang and Steve Shen of Digitimes.
The move comes as Apple may be looking to stem competition from the likes of the 7-inch Amazon Kindle Fire, which is currently the online retailers' best-selling, most wished for and most gifted product.
The relative success of large size smartphones like the Samsung Galaxy Note and the Samsung Galaxy Nexus may also have been a contributing factor.
Digitimes says that Apple could purchase the panels from LG Display and AU Optronics, with the production of the smaller models likely to debut towards the end of the first half of 2012, with the 'normal' sized iPad 3 coming out around March 2012.
Rumour has it, that Amazon is planning to build a large screen version of its Kindle Fire tablet, and should Apple launch a smaller sized tablet, it will be quite an irony given that Apple's former CEO, Steve Jobs, once criticised the rest of the industry for producing small screen tablets.
It would be interesting to see whether Apple brings down the price of this smaller iPad to that of the Amazon Kindle Fire, either by reducing its profit margins or by using older technology to differentiate it from the iPad 3.