Yet another rumor is bubbling about a new smaller iPad to be coming out in 2012. It seems as though Digitimes is the source of many of the new Apple product rumors, and that is due to the "sources" it has in Apple manufacturing sites. The smaller iPad is said to feature a 7.85 inch screen so that it will line up as a competitor to the Kindle Fire.
Sources also indicated that the iPad mini wouldn't be released with the iPad 3 in the first quarter of 2012. Instead the mini won't even go into production until the end of the 2nd quarter of 2012. This might indicate that if there is a launch it might be around the same time of the next iPhone launch.
As much as I would like to believe this rumor I don't believe it just yet. One of the biggest draws for consumers to the iPhone or iPad is the amazing App ecosystem. This in-between size would make it so that neither iPhone or iPad apps would function the same without some modifications. That being said all the iPhone 5 rumors talked about a larger screen, so maybe Apple's never version of iOS will be like Google's Ice Cream Sandwich and work across any screen size. We have a long time before we will get to see if this rumor is true, so don't start holding your breath just yet.