Recent rumors suggest that the second-generation iPad mini will adopt a Retina resolution display that exceeds the pixel density of its larger sibling, but doing so could raise the production cost of the device by more than 30 percent, according to sources speaking with DigiTimes Monday.

The iPad mini launched in October with what many argued was a disappointing 7.9-inch display at a resolution of 1,024-by–768. Late to the smaller tablet market, it is rumored that Apple will increase the resolution of the next generation model in order to better compete with Android-based products from Google, Amazon, and Samsung.

An important factor in Apple’s choice of the 1,024-by–768 resolution for the first-generation iPad mini was application compatibility. The first- and second-generation iPads sported the same resolution, meaning that existing iPad apps did not need to be modified to run natively on the new device. Facing the same compatibility requirements for a display upgrade, many argue that the next iPad mini will use the 2,048-by–1,536 resolution currently found on the full-sized 9.7-inch iPad.

Although arguably necessary to remain competitive, making the switch to a high resolution display for the next iPad mini will be costly for Apple, according to DigiTimes. In addition to an expected US$12 per unit increase for the improved display itself, additional components will be required to increase the brightness of the backlight and improve the GPU performance to compensate for the increased pixel density. These factors are estimated to raise the iPad mini’s total production costs by more than 30 percent, hitting the company’s already shrinking margins for which Wall Street has punished its stock price.

The current iPad mini carries a $188 bill of materials, according to a November report from IHS iSuppli. Its starting retail price is $329.

The schedule for Apple’s 2013 iPad refresh remains unknown, with rumors and analysts suggesting either an early Spring or late Fall launch.