The current 9.7-inch iPad 2

According to the Wall Street Journal, Apple is working currently testing components for a new iPad Mini that would likely debut in late-2012.

The current iPad 2 model features a 9.7-inch screen and an entry-level price of $499. A smaller tablet form factor could allow Apple to compete with the smaller/lower priced models like the 7-inch Kindle Fire and 5.3-inch Samsung Galaxy Note.

Interestingly, Steve Jobs was against a smaller tablet, telling investors, “It’s meaningless unless your tablet also includes sandpaper, so that the user can sand down their fingers to around one-quarter of their present size.” [source].

Rumors say that the iPad 3 (due out in early March) will have an upgraded screen resolution, and that this new 7.85-inch “iPad Mini” would retain the screen resolution of the iPad 2.

Was Jobs right? Is the iPad Mini doomed to fail? Or will it open up a new market for Apple tablets?