Apple Pulls The Plug On Samsung

Samsung’s guilty plea to a felony price-fixing charge is believed to be the reason why Apple has pulled out of a deal with the Korean company.Samsung Electronics Co.’s talks with Apple Computer Inc. on a possible joint investment to produce NAND flash memory chips — a key component of Apple’s newest portable music players — have broken down.

Samsung spokeswoman Sungin Cho said the negotiations “didn’t proceed beyond the preliminary stages,” but she would not say why.

The Korea Times newspaper, however, reported Monday that the potential $3.8 billion joint investment deal collapsed because Apple pulled out after hearing that South Korea’s Fair Trade Commission could investigate Samsung over its supply of flash memory to Apple.

Samsung is supplying the chips, used in MP3 players and digital cameras, to Apple for use in its new, pencil-thin iPod Nano music player.

Earlier this month, local media quoted Fair Trade Commission Chairman Kang Chul-kyu as saying on a radio program that the antitrust regulator could investigate Samsung if necessary on whether the company sold chips to Apple at below-market prices.

South Korean media have reported that Samsung is supplying the chips to Apple at half their market value, a claim Samsung executives deny. The Korea Times reported that South Korean MP3 manufacturers claim their sales are being hurt by the low price of the iPod Nano.

Last week, U.S. officials said Samsung will pay a $300 million fine to settle accusations it secretly conspired with industry rivals to fix prices of dynamic random access (DRAM) chips and force consumers them to pay higher prices. DRAM chips are most widely used in personal computers.

Samsung is the world’s biggest producer of DRAM and NAND chips. It is the second-largest semiconductor maker after Intel Corp. and is also one of the largest makers of liquid crystal displays, or LCDs, along with domestic rival LG Philips LCD Co.

Samsung’s guilty plea to a felony price-fixing charge capped a three-year investigation by the U.S. Justice Department into makers of the chips. The penalty is the second-largest criminal antitrust fine in the United States.

While Samsung officials have openly talked about supplying flash memory chips to Apple, they have declined to provide details.

Last week, I.J. Kim, vice president of memory sales and marketing at Hynix Semiconductor, the world’s second-largest memory-chip maker after Samsung, said that Hynix is in talks with Apple to supply NAND flash memory chips. He gave no specifics.