Smaller, budget iPad due in 2011?

Digitimes is reporting that Apple is planning to launch a new iPad in Q1 2011 that will sport a 5-7-inch display. It’s sources appear to be “upstream component” suppliers who suggest the price will be lower than $400. This is $100 cheaper than the current entry-level iPad.

It will differentiate itself from the larger model by concentrating its use as an e-reader rather that those that have “a high demand for text input”. Sounds interesting, although I’m not sure where this device fits into its portfolio, given that it doesn’t sound much bigger than an iPod Touch.