Apple Computers, the maker of iPod digital music players, has dropped a joint $3.8 billion investment plan in flash chip production of Samsung Electronics, a South Korean newspaper said on Saturday.
"Apple had proposed about 4 trillion won joint investment with Samsung Electronics in the production lines of NAND flash chips used for its MP3 players," a senior Samsung official was quoted by the Korea Economic Daily as saying.
"But as the anti-Samsung sentiment has recently deepened among some political and civic groups, Apple ended the talks, complaining about the sentiment," the unnamed official was cited as saying.
Apple was currently in talks with another memory chip maker for joint flash chip output in the United States, he added.
Samsung's and Apple's officials in Seoul could not be reached immediately for comment.
California-based Apple, which also produces Macintosh computers, plans to buy as much as 40 percent of Samsung's flash memory output in the second half of this year for its popular iPod Shuffle and other music players.
Samsung, the world's top memory chip maker, is boosting flash chip output, betting on strong demand from hot-selling digital cameras, music players and other portable devices. It competes with Japanese rival Toshiba in the NAND flash memory chip market.
Early this month, two executives at Samsung Group, the parent of the world's most valuable technology firm outside of the United States, were found guilty of conspiring in a 1996 deal to help the children of the group's chairman buy a majority stake in an affiliate at below-market prices.
Samsung later lodged an appeal with a local court.
South Korea-based Samsung Electronics reported on Friday a 30 percent drop in third-quarter profits from a year ago due to lower memory chip prices. But it forecast a recovery on brisk demand for sleek flat screens and pricier mobile phones.
After the earnings announcement, a Samsung executive forecast the average selling price of flash chips would fall about 20 percent in the fourth quarter from the preceding quarter, while demand was seen continuing to grow until the end of 2008.
Doubts among investors about the corporate governance and ownership structure of South Korean firms has kept stock prices low relative to corporate assets.
Shares in Samsung ended flat at 562,000 won on Friday, shedding initial gains, as investors fretted over its earnings growth potential.