By Scott Moritz, TheStreet

 

Apple (AAPL) is gearing up for production of a smaller second-generation iPad, perhaps to be launched in early 2011.

 

Apple's plans call for an iPad 2, which will be a 7-inch touch-screen tablet with a front-facing VGA camera and a 1-megapixel rear camera targeted for arrival in March, says Rodman Renshaw analyst Ashok Kumar, who has talked to Apple's supply and manufacturing partners.

 

The details of the iPad 2 help confirm recent rumors that Apple is shrinking the popular iPad to defend its position against a wave of smaller new tablets like the Dell (DELL) Streak (a 5-inch device) and the Samsung Galaxy Tab (7 inches). But contrary to earlier reports of a new iPad in time for the holidays, the new information puts the arrival closer to spring.

 

The iPad 2 is being made by Pegatron, the Taiwan contract manufacturer that is also assembling Apple's CDMA iPhone, which is expected to appear at Verizon (VZ) early next year, Kumar says.

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Apple's decision to introduce a smaller, presumably cheaper follow-up to the original iPad is a bit puzzling. Clearly, it signals the possibility that Apple sees a threat to its tablet franchise at the lower price levels. But Apple may also want to shrink the device so it doesn't cannibalize its notebook sales. Post continues after video:

The news of the iPad 2 comes less than a week after Samsung unveiled its Galaxy Tab, a touch-screen device that will arrive at Verizon, Sprint (S), AT&T (T) and T-Mobile in the coming months.

 

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