DigiTimes today continued their flood of iPad rumors with report that AU Optronics (AUO) has received orders for 7.85-inch LCD panels that Apple will use in their 7.85-inch iPad model later this year. DigiTimes report was based on an article published by Chinese language newspaper. Steve Shen wrote on DigiTimes:

Apple will also purchase 7.85-inch panels from LG Display but exclude Samsung Electronic from the supplier list, the paper indicated.

Backlit unit (BLU) maker Forhouse, an associate company of AUO, is also expected to enter the supply chain of the 7.85-inch iPads along side with AUO's flat panels, the paper added.

Additionally, Apple reportedly plans to outsource the production of the 7.85-inch iPads to Pegatron Technology, instead of Foxconn Electronics, which has been the largest OEM for the iPad lineup, said the paper.

We should take Apple rumors posted by DigiTimes with a big mountain of salt, but rumors about a 7.85-inch iPad model are gaining steam. Even Samsung’s own investment bank believes that Apple is planning to release a 7-inch iPad mini in Q3 2012. Josh Ong wrote on AppleInsider:

OLED-Display.net claims to have obtained the official document, which is dated December 2011, from "an anonymous user" at Samsung.

According to the research note, which discusses the state of AMOLED in the industry, analyst JungHoon Chang predicted Apple will release the third-generation iPad in the first quarter of 2012 and "a new 7-inch product temporarily referred to as the iPad mini" in the third quarter of this year. Chang also appeared to confirm the use of "higher-resolution IPS panels" in the next-generation iPad.

Our sources also say that Apple is working on a cheaper iPad model, but they have no information about specification of that model. Whether it be based on same 9.7-inch screen as iPad 2 or on a smaller 7.85-inch screen, or what kind of processor and storage it will have. However, one thing is now looking certain Apple will have more than one iPad model on sale this year.