John Gruber, as usual, has the best commentary on what a smaller iPad might entail:
All that matters is whether a smaller iPad would actually be good. If Apple ships it, it will be judged on its own merits, regardless what Steve Jobs said 18 months ago. That’s it.
It would be enough to link to for this quotation alone, but there’s also something else that he wrote last week that has cropped up again (quoting from the previous link because it has the best explanation):
Displays aren’t manufactured at their finished size; rather, they’re made on big sheets, and then cut to size. I believe the iPad Mini (or whatever it’s going to be called) uses the same display as the iPhone 3GS. So instead of cutting these sheets into 3.5-inch 480 × 320 displays for the iPhone 3GS, they’ll cut them into 7.85-inch 1024 × 768 displays for the smaller iPad. Same exact display technology, though — display technology that Apple has been producing at scale ever since the original iPhone five years ago.
This is something I doubt, if only because Apple has been touting the benefits of IPS displays since the iPhone 4 was introduced. All recent new products—iPad, displays, unibody iMac, and new MacBook Pro—have used IPS displays. The iPhone 3GS doesn’t have an IPS display. I’d be willing to bet that an iPad Mini would gain a panel with the same pixel density as the 3GS display, but built with IPS technology, not a twisted nematic panel.
The only exception to this, where a new product hasn’t gained an IPS display, is with the fourth-generation iPod touch1, but it’s constrained by its price tag. Another possibility, one that I haven’t seen anywhere, is that Apple might use the panel from the iPod touch, and cut that to a 7.85-inch diagonal size. It would be a Retina display, but it would be cheaper than that used in the iPad or iPhone because it’s a TN panel.
I don’t count the recent MacBook Air/Pro refresh because that was a spec bump, not a new product. The next generation of MacBook Airs will gain Retina displays, and therefore almost certainly gain IPS panels. ↩︎