Now, why would Apple go against Jobs' wishes? "In order to cope with increasing market competition [from]...the 7-inch Kindle Fire...and the launch of large-size smartphones," according to the report.

Displays will be provided by LG and AU Optronics (AUO), the report said, citing sources. Production is expected to begin before the end of the second quarter of 2012.

Richard Shim, an analyst at DisplaySearch has told CNET more or less the same thing. That is, Apple is expressing interest in making a mini-iPad based on a 7.85-inch screen. Like Digitimes, Shim said this would come later in 2012 after Apple releases the next-generation 9.7-inch iPad with a QXGA screen. The latter is expected in the March-June time frame.

But in November 2010, Jobs tried to quash any rumors about Apple making an iPad with a screen less than a 10-inch diagonal, citing a lack of real estate for "great" tablet apps.

"Apple has done extensive user testing and we really understand this stuff...There are clear limits on how close you can place things on a touch screen, which is why we think 10 inch is the minimum screen size to create great tablet apps," Jobs said at the time.

Jobs continued. "One naturally thinks that a 7-inch screen would offer 70 percent of the benefits of a 10-inch screen...this is far from the truth. Seven-inch screens are 45 percent as large as an iPad," Jobs said. "This size isn't sufficient for making great tablet apps."

Ah, but that was before the Kindle Fire and Nook Tablet. Amazon said today that it has sold millions of Fires and that "in fact, demand is accelerating--Kindle Fire sales increased week over week for each of the past three weeks," Amazon said.