RUMOR Passed On By Mac Observer: 5.6- and 7-inch "eBook-Oriented" iPads In The Works?

From The Mac Observer:

Apple plans to launch a second generation iPad with 5.6-inch (14 cm) and 7-inch (18 cm) screens, according to DigiTimes on Tuesday. The iPads would be more focused on eBooks and less on multimedia.

“The sources noted that Apple has recently placed new iPad orders to Taiwan-based component makers for the fourth quarter of 2010 and the first quarter of 2011 with 9.7-inch, 5.6-inch and 7-inch models all included,” DigiTimes reported. The 9.7-inch model is said to have only minor changes and no camera was mentioned.

This move, if it proves correct, would be very similar to how Apple undercut competition with the original iPod by shipping smaller, less expensive iPods like the nano and shuffle. These appealed to a wider market due to the lower price and served to increase Apple’s market share.

The report also noted comments by their senior analyst that Samsung, a major supplier of OLED panels, can’t even supply their own needs, so it remains unlikely that Apple would be able to switch to OLED panels in smaller iPads sold by the millions.

DigiTimes has not always been on the mark with its insider information, so, as usual, take this rumor with a grain of salt.