DigiTimes is reporting that along with two iPad 3 models, Apple will also unveil an 8GB iPad 2 model at Wednesday’s Apple event. Aaron Lee wrote on DigiTimes:

As Apple has scheduled an event on March 7, sources from its upstream supply chain pointed out that the company is expected to launch two iPad 3 models - a 16GB version and 32GB version.

In addition to iPad 3, Apple is also expected to unveil an 8GB iPad 2, allowing the tablet PC series to cover different segments and to defend against Windows 8-based tablet PCs, the sources noted.

We have also heard that Apple will be lowering the price of iPad 2 to better compete with lower end of tablet market. However, our sources say that DigiTimes in wrong about two iPad 3 models, the 16GB and 32GB only. They say Apple will continue to have three models mostly 16GB, 32GB and 64GB and if they go with just two models it will be 32GB and 64GB for iPad 3. The sources also mentioned that Apple was looking at a 128GB model, but they didn’t knew if Apple plans to launch a 128GB model this year.

In other iPad related news from DigiTimes, Apple is planning to start production of 7.85-inch iPad model in Q3 this year. Component makers have started to deliver sample component for 7.85-inch iPad to Apple for verification, which would indicate that if all goes well Apple is planning to start mass production in about six months. Max Wang wrote on DigiTimes:

The planned launch of the 7.85-inch iPad is apparently to take on Amazon's US$199 7-inch Kindle Fire as well as a comparable model from Barnes & Noble, although Apple already took up nearly a 60% share of the tablet PC market in 2011, indicated the sources.

The price of the 7.85-inch iPad is likely to be set at US$249-299, since Apple is also expected to release an 8GB iPad 2 for US$349-399, and has lowered the price of the 16GB iPad 2 to US$449, the sources noted.

A smaller 7.85-inch model will be a logical choice to compete in lower end tablet market, unless Apple is ready to bring done cost of 9.7-inch iPad model by using low quality material. We think by end of this year Apple will compete in sub $300 tablet market with a 7.85-inch model and they will use iPad 2 to address sub $400 market, while iPad 3 will take care of higher end tablet market.[Image Via MacRumors]