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GeekWire is hearing from a reliable industry source that Amazon is testing a device with a screen resolution of 768×1024 pixels. That’s all we know for sure, but we can offer up some educated speculation about what it means.

The first thing that many people will point out is that 768×1024 is the same resolution as the iPad. But before you jump to any conclusions, this doesn’t appear to support the rumors that Amazon is coming out with large-screen Kindle Fire to compete more directly with the iPad. That may well be the case, but based on what we’re hearing, this particular clue is more likely an indication that Amazon is planning to boost the resolution of the E Ink screens in its next generation of Kindle readers.

The company’s current Kindle e-readers come with 600×800 screen resolution. The higher pixel density would result in crisper type and clearer images than the current Kindle readers provide. And it’s not far-fetched: E Ink screens with 768×1024 resolutions already exist.

LG, for one, has developed a flexible E Ink screen with those specs. Earlier this year, the Digital Reader blog posted a video showing how the 600×800 screen compares to the 768×1024 screen in an e-reader.

Bottom line, it won’t be a surprise if higher-resolution screens are one of the new features in the next version of Amazon’s 6-inch Kindle e-readers.

Presumably that won’t be the only new feature. TechCrunch reported in April that Amazon was also planning a front-lit screen for the next generation of Kindle readers. Barnes & Noble has since added a similar “GlowLight” feature to the Nook.

Amazon this week announced plans to hold a news conference in Santa Monica on Sept. 6, where it’s widely expected to unveil the next Kindle lineup, but the company isn’t giving any details in advance.

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