Not gonna happen

Rico says that, if Steve Jobs didn't like it, you'll probably never see it, but AP has a Time article about a 'might've been' Apple iPad:

Apple generates more gossip than the Kardashians.
There’s a constantly spinning mill of rumors about Apple products, most of which turn out to be untrue. What’s unusual this week is that talk has revived of a smaller iPad model, an idea company founder Steve Jobs derided publicly a year before he died.
(Jared Newman has a related Techland article about Apple reportedly testing a smaller iPad)
Apple and its suppliers aren’t commenting. Rumors of a smaller iPad, or “iPad mini”, have percolated ever since the first iPad was launched two years ago. This time around, they’re fed by media reports from South Korea, China, and Taiwan, saying Apple has ordered Samsung screens that are 7.86 inches measured on the diagonal. That would make the screen about two-thirds the size of the current iPad, which has a diagonal measurement of 9.7 inches.
A smaller tablet would help Apple further its lead in the tablet market. “From a competitive standpoint, we believe an iPad mini with a lower price point would be the competition’s worst nightmare, says Shaw Wu, an analyst at Sterne Agee. “Most of their competitors already have a tough enough time competing against the iPad.”
Apple has successfully fended off competitors who have tried to sell tablets in iPad’s size range. But, last year, Amazon figured out how to crack Apple’s stranglehold on tablets by making a half-size, no-frills tablet. The result was the Kindle Fire, which sells for $199, which is basically the cost of production. Amazon has sold millions of them.
Apple sells the iPod Touch for $199, but its screen is about a quarter of the size of the Kindle Fire, a big disadvantage for people who want to enjoy books, movies, and games. It also sells the older iPad model for $399. It has nothing in between.
Price isn’t the only reason customers might prefer a smaller tablet. A seven-inch model would fit in many handbags, unlike the current iPad.
Wu says he’s seen evidence of Apple experimenting with both smaller and larger tablet screens since 2009, and doesn’t sense that the release of an iPad mini is “imminent.”
It could be hard for Apple to make money from an iPad-quality seven-inch tablet that sells for $299. Analysts at IHS iSuppli estimate that a smaller tablet would cost around $250 to produce, a figure that doesn’t include development costs, packaging, or patent royalties. That suggests Apple would price it at $329 or $349.
“The first thing you always have to keep in mind is: Apple is not going to sell an unprofitable product,” says Rhoda Alexander at iSuppli.
A smaller iPad would be a headache for software developers. “Going to a different screen size ends up being a ton of work,” says Nate Weiner, the creator of Pocket, an application that stores web pages and other material for later reading. “If you take, for an example, an interface built for the iPad and try to cram it into the Kindle Fire, it just doesn’t fit,” he says. However, developers who have already adapted their programs to the Kindle Fire or other seven-inch tablets wouldn’t face a big hurdle in adapting to a third Apple screen size, Weiner says.
Apple’s late CEO, Steve Jobs, made a rare appearance on an October 2010 earnings conference call to launch a tirade against the seven-inch tablet Samsung was set to launch as the first major challenger to the iPad. “The reason we wouldn’t make a seven-inch tablet isn’t because we don’t want to hit a price point, it’s because we don’t think you can make a great tablet with a seven-inch screen,” Jobs said. “The seven-inch tablets are tweeners, too big to compete with a smartphone, and too small to compete with an iPad.” He said the resolution of the display could be increased to make up for the smaller size, but that would be “meaningless, unless your tablet also includes sandpaper, so that the user can sand down their fingers to around one quarter of the present size. There are clear limits of how close you can physically place elements on a touch screen before users cannot reliably tap, flick or pinch them. This is one of the key reasons we think the ten-inch screen size is the minimum size required to create great tablet apps,” he said. Jobs failed to mention Apple’s success developing apps that use taps, flicks and pinches on the iPhone, with its 3.5-inch screen.

Harry McCracken had more in a 2010 Techland article:

Recently, I spent time with Samsung’s new Galaxy Tab tablet. As I said in another column, it’s not an iPad killer, but it is the first post-iPad tablet from a major company that qualifies as a true iPad competitor.
The most obvious difference between the Tab and the iPad is really, really obvious: the Tab has a seven inch display versus the almost ten inches on the iPad, making it feel less like a digital magazine and more like a mass-market paperback. As I used the Tab, I thought about Steve Jobs’ rant about why seven-inch tablets are a terrible idea, period. He said the seven-inch models were tweeners, too small to compete with the iPad and too big to compete with smartphones. He said they’d be dead on arrival. Most memorably, he said they should come with sandpaper, since owners would need to sand their fingertips down to use them.
Well, the Galaxy Tab I’ve been bopping around with didn’t come with sandpaper, and I haven’t had any trouble tapping my way around the interface. Its small size makes it more portable than an iPad; I’ve taken it with me in instances when I might have left an iPad at home. It’s one of the things I like about the Tab.
Don’t get me wrong: the iPad is easily the better product overall, mostly because its interface is vastly more polished and well-optimized for tablet use, and the integration of hardware, software, and services is far more seamless. And there are things that work well at ten inches that wouldn’t at seven inches, just as some dead-tree books demand larger page sizes than others. But exposure to a seven-inch tablet leaves me thinking it’s a legitimate size.
And, yet, Jobs’ tirade was clearly in part a response to rumors about a seven-inch iPad. And as I used the Galaxy Tab and thought about what a seven-inch iPad might be like, it was obvious that simply shrinking the current iPad experience down wouldn’t work at all. Making the iPad buttons smaller would make them harder to tap. More important, a lot of popular third-party iPad apps are all about text. All those magazine and newspaper apps would be impossible to read if they were suddenly shrunk to half of their current size.
It is, of course, possible to design operating systems and apps with interfaces that scale up and scale down; that’s why OS X is pleasing on both a MacBook and an iMac. But iOS is not such an OS: It’s available in a form optimized for a iPhone/iPod Touch display and another one optimized for an iPad display. That’s it for now. And those may be the only two iOS sizes until Apple rejiggers the OS further to make it work really well on another form factor.
As for Jobs’ confidence that seven-inch tablets will be DOA, history has proven a gazillion times that it’s way safer to bet with Steve Jobs than against him. But, with the Nookcolor and BlackBerry Playbook and other seven-inch devices on the way, the industry will at least have plenty of chances to prove Jobs wrong in this instance. And it’ll be interesting to see if tablets closer in size to the iPad do any better as a class than the little guys.

Rico says that it'd be cool, but you probably won't see one from Apple. (Not that Rico would want a Kindle Fire, at any price...)