Microsoft is working on a 7-inch Surface tablet that will compete with Apple's iPad Mini 2, reports have forecast recently.

A person familiar with Microsoft's product plans claims that Microsoft is working on the mini Surface to rival other big competitors like Google who launched the Nexus 7 and the Nexus 10, reports from an unnamed source quoted by Run Media Services UK said.

The smaller Surface is rumoured for production later this year and perhaps it would be just in time for the holiday madness.

The source claimed that Microsoft executives realized that they need to be more competitive in the tablet market and come up with some kind of answer to rival the smaller slabs.

Despite the fact that the smaller tablets were selling like hotcakes last year, a 7-inch Surface simply was not part of the company's strategy at that time.

Considering that half of the tablets that were shipped in Q4 2012 were smaller than 8 inches, this forced Microsoft to come up with an alternative and now they are prepping up with the mini Surface.

iPad Mini 2, on the other hand, will feature a screen with a resolution of 2048 x 1536. This is almost four times the resolution of the present iPad Mini and is equal to the fourth generation iPad which was released along with the iPad Mini last year. AU Optronics has been rumoured to be making displays for the iPad Mini 2.

Other specs include a more powerful dual core A7 processor and a 7.9 inch screen. It will also feature a 10-hour battery life, a FaceTime HD camera, and an iSight camera with 1080 pixels HD video recording. Apple is also trying to reduce the thickness of the iPad Mini 2 by using the Sharp's IGZO (indium gallium zinc oxide) technology in its screens.

Companies have yet to confirm said reports.