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Apple, Samsung memory fab plan killed, says report

Posted by iTech - 2005-10-17

LONDON — Samsung Electronics Co. Ltd. has blamed the South Korean Fair Trade Commission (FTC) for killing a deal it was putting together to build a $3.8 billion joint-venture flash memory wafer fab with Apple Computer Inc., according to a Korea Times online report.
“It is true that Samsung and Apple were conducting joint research on the project, but we found that it is commercially not feasible,” the report quoted Hong Kyung-sun, a Samsung spokesman as saying.

The two companies had planned to construct a wafer fab in South Korea to supply NAND flash memory for the iPod MP3 player, but Apple pulled out after hearing that the FTC might investigate Samsung over the artificially low pricing of flash memory, the report referenced Kim Il-ung, marketing director of Samsung’s semiconductor business, as reportedly saying at an investor relations conference on Friday.

Apple is now looking for a partnership with one or more other semiconductor companies, the article reported Kim as saying.

South Korean MP3 player makers have claimed they are being hurt by the unfair low cost of Apple’s latest MP3 player, the iPod nano. It has also been alleged that Samsung is supplying its flash memory chips to Apple at half their market value, the report said. Kang Chul-kyu, chairman of the FTC, told a radio program that the FTC “could take action,” over an alleged unfair deal between Samsung and Apple, if local MP3 player makers requested it, the report said.

“We have profited about 30 percent on memory sales, and such a high profit rate would be impossible if we were selling chips at half price,” the report quoted a Samsung executive as saying during a conference call with institutional investors on Friday.

Samsung reported its third quarter financial results last week and semiconductor sales were 4.59 trillion won (about $4.4 billion), up 10 percent over the second quarter, but down 3 percent from a year ago. Samsung’s semiconductor operating profits were 1.35 trillion won ($1.3 billion) for the period, up 27 percent sequentially, but down 11.7 percent from the same period a year before. Samsung cited DRAM price weakness rather than flash price weakness in its commentary.

Samsung reported that bit growth for NAND-based flash devices jumped 37 percent in the quarter and to meet demand from Apple and other OEMs, it said it had re-allocated the production within its “Line 9” 8-inch fab in Korea from DRAM to flash. On the DRAM front Samsung has agreed to pay a $300 million fine levied by the U.S. Department of Justice over price-fixing charges.



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