Apple is looking to fight off rivals bidding to establish a foothold in the tablet market, with the manufacturer developing a smaller, cheaper version of its best selling iPad tablet, according to reports.
The news that Apple is working on an 'iPad Mini' comes after increased competition in the tablet space, with a spate of new launches.
Google recently launched the Nexus 7, a seven-inch device that cost £159 and goes on sale in the UK this month. The device was built by Asus and will feature a 1.3GHz Nvidia Tegra 3 quad-core processor and a front-facing camera.
Microsoft also launched its Surface tablet last month, which runs on Windows 8, the latest version of the software giant's operating system. The Surface tablet will compete with the iPad and is aimed at business users.
Amazon is also seen as a potential challenger in the UK tablet market after the company sold millions of its seven-inch Kindle Fire tablet in the US last year. The device is expected to go on sale in the UK later this year.
Although Apple remains the dominant player with 61% of market share, according to research firm Gartner, the development of the iPad Mini would be seen as a crushing blow to rivals.
According to The Times, Apple insiders told Bloomberg that the company hoped to sell the device for $199 (£127) – half the cost of the current iPad, which ranges from £399 and £699. The iPad Mini could be released by the end of the year.
Apple is believed to have been considering launching an iPad Mini for a while as it would be more affordable in emerging markets, where the company's devices are considered too expensive for customers.