The report comes from the Taiwan Economic News. The report used the word "outbid," which might mean that Pegatron came in with a better price for iPad 3 production. At the same time, however, the report did say that Apple had been looking for another manufacturer in the wake of the explosion that occurred at Foxconn's Chengdu plant.
This order, plus the iPhone 5 order, seem to point to a shift away from Foxconn and Hon Hai for Apple. Apple has long used Foxconn to manufacturer its iDevices as well as other products. Foxconn became renowned not for its manufacturing, but for its employee deaths in 2010 when a rash of suicides hit its Shenzhen plant in southern China.