At a time when the 7-inch tablet space has suddenly become the talk of the town with already released devices like the Google Nexus 7 and those still under wraps like the iPad mini, a report surfaced Sunday saying that online retailer Amazon is gearing up to unleash its own challenger towards the second half of this year, the successor to the Kindle Fire, to compete against rival products.

The news came from AllThingsD, which cited sources familiar with Amazon's plans, saying that the company is likely to release the next iteration of the Kindle Fire tablet in the second half of this year, possibly in the third quarter. To do so, Amazon has been approaching developers to bring them up to speed on the new hardware.

The sources also revealed some key changes in the device. According to them, the new Kindle Fire model would be thinner and lighter than the original one. The device would also feature a built-in camera and an improved display -- something that seems quite obligatory since Google has raised the bar higher in terms of the 7-inch tablets with its new Nexus 7.

The report further said that developers familiar with the device have already been instructed to build apps that would support a 1280 x 800 pixel resolution, bumped up from the 1024 x 600 display of the current Kindle Fire - the same as other tablets such as the 10.1-inch Toshiba Thrive, the Acer Iconia tablets and, of course, the Nexus 7.

The improved resolution would give the device a sharper and more vibrant display as well as a different aspect ratio.

The really interesting thing here is that the screen shape is changing slightly: From an aspect ratio of 1.71 (tall and narrow in its standard Portrait mode) to an aspect ratio of 1.60, AllThingsD quoted DisplayMate President Raymond Soneira saying.

That's a 67 percent increase in total pixels, and it is visually significant. It gives the display a PPI (pixels per inch) of 216.

The increase in resolution also raises concern about the device's battery life and the overall form factor. However, DisplaySearch senior analyst Richard Shim said that it won't make much difference.

The increase in pixel density isn't as drastic as it was in the 1024 x 768 iPad 2 to 2048 x 1536 new iPad, so it's less likely to significantly alter battery life or thickness, Shim told AllThingsD.

As regards rumors, other likely features to be included in the new Kindle Fire are a faster chip, improved graphics and an updated version of Android to support that new display.

Apple, the market leader for tablets, is also said to be preparing for a smaller and cheaper iPad by the end of the year. Bloomberg recently reported that the Cupertino tech giant would unveil a 7- to 8-inch tablet later this year to help maintain dominance of the tablet market as Google Inc. (GOOG) and Microsoft Corp. (MSFT) prepare competing handheld devices.

The report added that Apple might announce the so-called iPad mini by October. They also said that the device won't feature the high-definition Retina display found on the existing third-generation 9.7-inch iPad that was released in March.

Some other reports also suggested that the smaller version of the iPad would be priced between $249 and $299, $100 more than the entry-level model of the Nexus 7.