Apple is working on a smaller iPad to compete with Amazon's Kindle Fire and the Google Nexus 7, according to reports in both Bloomberg and the Wall Street Journal. Bloomberg, which cites "two people with knowledge of the plans", adds that the tablet won't have a retina display of the type seen on all current-generation iPads and iPhones. The WSJ, citing "people familiar with the situation", adds that it is expected this year.

The tablet is likely to sell for a price competitive to that of the Kindle Fire and Nexus 7, which would mean around £150 in the UK. Although those two tablets are heavily subsidised to hit that price point, Apple remains primarily a hardware company, so would likely only sell such a device if they could make a relatively healthy profit on first sale.

This fact, combined with the expectation that the new device will have a lower resolution screen, has led many to speculate that Apple will be using the same manufacturing process it currently uses to make the screens for the iPhone 3GS, the cheapest phone it currently sells. That process has three years of refinement behind it, and using the screens for a second device would lead to greater economies of scale, increasing the company's margins further.

In addition, the size of a screen with the same resolution as an iPad (1024x768) and the pixel density of an iPhone 3GS (160dpi) would be around 7.75 inches. This would result in a device significantly smaller than the current iPads, but which developers – Apple's perennial advantage over its competitors – could support without having to do any extra work.

This means that Apple could bring out a tablet with a full collection of native apps from day one – something which the Nexus 7 will lack, as well as any access to music, magazines or TV shows in the UK.

And they will retain the economies of scale which they currently have with the iPad 2, as many of the components in that are likely to be cannibalized for the new tablet.

The one question that remains is when. MG Siegler has doubts about the "this year" timeframe, arguing that it would clash with, and overshadow, the expected launch of a new iPhone this autumn, while Marco Arment points out that, to fulfil demand for this Christmas, Apple would realistically have to have begun production, which almost always involves leaks of size and shape – yet we have had none.

It seems likely, then, that we will see a 7.7", 1024x768 "iPad mini" arriving around January, the same time as all three previous iPads have been announced. Google will have a six-month head start in the UK, and will need every day of it.