Production on Apple's next-generation iPad, presumably called the iPad 3, is underway. The company's foreign supply chains have reportedly begun delivering components for the new tablet to Apple's original equipment manufacturers (OEMs), while also shipping fewer components for the iPad 2. The new report, which states the iPad 3 could be ready in around three to four months, falls in line with last week's report from a Citi analyst, who reported that the iPad 3 will likely be released in February.

OEM production of iPad 2 will remain high at 14-15 million units in the fourth quarter of 2011 but decline to 4-5 million units in the first quarter of 2012, paving the way for the launch of the new iPads, the sources said.

The report also said Foxconn Electronics, one of Apple's foreign supply chains that has been repeatedly questioned over its working conditions, will begin to produce the new iPad 3's in January and ramp up production in February.

Little is truly known about the iPad 3, but previous reports have stated that Apple's next tablet will feature a new quad-core A6 processor, a thinner, lighter and longer-lasting battery pack, and a Retina Display that would double the pixel density of the iPad 2. Reports say the iPad 3's display would be somewhere in the ballpark of 2048 x 1536 pixels.

The larger resolution should provide the company's app developers more convenience, while all future applications will be able to run under any of Apple's machines including the 27-inch iMac, that report said.

The code for the reported iPad 3 was discovered in November, when Apple began seeding a beta version of iOS 5.1 to developers. Hidden within the code were references to a next generation iPhone and two next-gen iPads, internally named iPhone 5,1, iPad 2,4 and iPad 3,3, respectively. Analysts believe the iPad listed as iPad 2,4 is not a new iPad, but rather an upgraded iPad 2 with WiMAX functionality, possibly powered by Sprint. The iPad 3,3 is likely a completely new device.

Apple's Taiwanese supply chain says the company looks to improve upon the single LED backlight bar designed for the iPad 2's 1024 x 768 resolution display in its next tablet. Several vendors have pitched alternative solutions to the Cupertino, Calif.-based company, including a design that looks just like the singular LED bar but features two LED chips inside, but Apple is reportedly leaning towards a third option, which involves dual-LED light bars inside the iPad 3, one on the left and one on the right. The supply chain says Apple is very interested in this option, now that the manufacturers of LED back-light units have reportedly solved several puzzles involving heat dissipation and battery consumption. These LED issues had reportedly affected the launch schedule of the iPad 3.

Apple has been receiving tablet components at its overseas facilities since the end of October. Sources close to those supply chains believed Apple will pre-constructing about two million new iPad 3's by the end of December, which looks to be true now that tablet parts have begun to arrive at Apple's OEMs.

The overall design of the iPad 3 is still widely unknown. Sources from within Apple's supply chain say the company had yet to sign off on a final design, but Apple has reportedly developed two next-generation designs, codenamed J1 and J2, which each feature slightly different specifications, sizes and technologies. One report has called the J2 model a more ambitious upgrade from the iPad 2 compared to the J1, but Apple is likely to make the final decision on which design to mass produce by early next year. Another report said the tablet will need to be thicker to accommodate the dual-LED bars required to achieve the Retina Display on the iPad, while another report said Apple has redesigned its dock connector to be smaller, which would help cut down on the device's overall thickness.

Apple sold 32.1 million iPads in the fiscal year ended Sept. 24. Apple is expected to easily exceed 40 million iPads after the December quarter.