Apart from the numerous rumors about the upcoming release of iPad 3, tech giant Apple, Inc (NYSE: AAPL) is said to be working on a new iPad with a 7-inch screen that costs under $400.

According to the sources of M.I.C. Gadget, the new iOS device is under development by the Cupertino-based company. The device is excellent in iOS gaming and multimedia. The device will come with a tapered design, voltage ARM processor, a powerful GPU, and a large battery.

The device will be offered in developing nations such as Brazil and China and will compete with other smaller tablets. The rumored new gadget is said to be sporting a wireless keyboard that is not efficient on power. Thus, low voltage ARM chip will be used. The device is set for release on the fourth quarter of the year and Apple is preparing to release it by Christmas of 2012.

The Wall Street Journal reported that Apple is working on a smaller iPad with its suppliers. However, according to WSJ, the smaller iPad has 8-inch screen. On December 2011, a report claimed that AU Optronics and LG Display had sent samples of 7.85-inch display to Apple, who is gearing up to launch iPad mini early next year. According to that report, Apple is gearing up to launch a 7.85-inch iPad mini prior to the 4th quarter of 2012.

Last November, The Korean Times reported about iPad mini. The publication claimed that the rumor is from a reliable source in the industry. According to the insider, Apple and LG Display are in talks of the future iOS devices. This includes iPad mini and iPhone 5. Another meeting between the two famous tech companies will take place in the next few days and one of the agenda in the meeting is the introduction of a tablet that has 7.35-inch size.

Steve Jobs famously dissed Apple's competitors for launching tablets that are sporting 7-inches. Jobs believed that a 10-inch screen is much-needed to express the device. However, when Amazon released its small $199 tablet, that became a hit during the holidays,Apple may have been forced to reconsider its decision.