I believe the iPad Mini (or whatever it’s going to be called) uses the same display as the iPhone 3GS. So instead of cutting these sheets into 3.5-inch 480 × 320 displays for the iPhone 3GS, they’ll cut them into 7.85-inch 1024 × 768 displays for the smaller iPad.
This makes a lot of sense, and it’s also worth considering what this would mean for the 3GS.
Apple probably wants to push the iPhone even further downmarket to capture more share in low-cost markets. iOS 6 is being released, presumably, with the next iPhone. Precedent suggests that upon the launch of the next iPhone, the 3GS will be eliminated, the 4 will become the free-with-contract model, and the 4S will become the $99 model.
But what if that’s not happening this time? Maybe Apple went to the trouble of cramming iOS 6 into the 3GS not because it’s for sale now, but because it will continue to be for sale for another year. They can obviously produce them very cheaply by now. How low can they push that price?