Apple has already announced the launch of an iPad 3 in 2012 to compete with Amazon's Kindle Fire, but DigiTimes reports that the tech giant may actually be launching two tablets next year: and one of them, a 7-inch 'mini' iPad, could end up knocking Kindle Fires sales completely out of the water.

The Taiwanese technology-news outlet released a report Dec. 16 indicating that since roughly 70 percent of the 60 million tablet computers shipping out by the end of 2011 will be Apple products, the company is going to cash in on 2012.

The first model, the iPad 3, will thus be topped by a mini version of tablet in the fourth quarter, featuring displays by LG and AU Optronics (AUO).

Jobs Rejected Idea of Mini iPad

There's plenty of reasons to be skeptical about the release of a mini iPad, not the least of which because Apple has done nothing to hype a tablet computer boasting specs to rival the Kindle Fire and a size that's rumored to be roughly 7.85 inches at most.

Beyond the lack of media buzz up until now, and the fact that DigiTimes' report is the only information tech geeks have yet to go on, there remains the fact that Steve Jobs, the late Apple visionary and CEO, would never have approved it.

Back in 2010, Steve Jobs answered rumors that Apple was prepping a mini iPad for release, saying the product would be dead on arrival.

Jobs rejected the idea that app designers were working on a 7-inch model, and even quipped that a mini iPad would never work unless it came with sandpaper so users could file down their fingers to use it, according to Pop Herald.

DigiTimes Report Has Some Weight

That being said, with Steve Jobs' death Apple has lost both their visionary and his stringent policies on potential Apple products.

The DigiTimes report is not just a rumor floated by a random tech magazine, either: this is a publication that produces reports and news briefs of the supply side of many of the major tech industries.

Nor is DigiTimes the only one to float the theory, though it is the most prominent.

Richard Shim, an analyst at DisplaySearch, also told Pop Herald that Apple is interested in making an iPad with a 7.85 inch screen. He agreed that it would likely launch later in 2012.

The Danger of Amazon's Kindle Fire

Despite what Steve Jobs would think of Apple creating a seven-inch iPad, meanwhile, the fact remains that the Kindle Fire is heating up the competition, and that the market for smaller and faster tablet computers just keeps increasing.

The report says Apple is likely to produce the mini iPads in order to cope with increasing market competition... [from] the 7-inch Kindle Fire... and the launch of large-size smartphones.

As better smartphones provide competition for tablet computers as a whole, models like the successful Samsung Galaxy Tab and the ill-fated Motorola Zoom have already tried to get in on the 7-inch mini tablet action.

But if Apple is planning on releasing a mini 7-inch iPad tablet, there's only one company and one product it's gunning for: Amazon's Kindle Fire.

The Kindle Fire has generated a lot of buzz in 2011. Hundreds of dollars cheaper than Apple's iPad 2 or its other Android competitors, analysts are claiming the tablet computer is set to grab the second spot in the tablet market by the start of 2012 thanks both to its cheaper price tag and browser abilities.

While no specific breakdown of Amazon sales has happened yet, the Kindle Fire has supposedly netted one million sales a week in the past three weeks alone, and has been a best-seller in Amazon's repertoire ever since it launched in September.

Could Mini iPad Challenge Kindle Fire?

If the DigiTimes report is true, it means that Apple, rather than shaping tech trends as it has for years, may actually be forced to respond to them.

If the Kindle Fire's capabilities, size and price tag are this much of a threat, releasing a cheaper iPad 3 with a premium 7-inch mini iPad could help Apple keep the upper hand.

When Steve Jobs first dismissed a mini iPad, he said Apple had done extensive user testing and found clear limits to how much designers could cram onto a 10-inch screen, the current size of the iPad 2.

In November 2010, however, Jobs also said there was no competition for great mini tablet computers. Now that Amazon's Kindle Fire is in play, however, and joined by would-be competitors like the Nook Tablet, the Apple mini iPad rumors don't sound so crazy as they did even a year ago.

Analyst Tim Bajarin says that if Apple does release a 7-inch tablet, it will likely be stripped of some of the features the iPad 2 and future iPad 3 can boast. That was Steve's issue with netbooks, they were stripped down notebooks, he told CNET.

For some consumers, however, the idea of an iPad that users can slip in their pocket is just too good to pass up.