S Korea watchdog scrutinises Samsung chips deal

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South Korea?s regulators are studying whether Samsung Electronics sold its its flash memory chips at an unfairly low price to Apple Computer, following complaints from local rival producers of MP3 players.

The investigation comes a month after a lawmaker from the ruling party questioned regulators over allegations that Samsung sold Nand flash memory chips, used in MP3 players and digital cameras, to Apple at a 50 per cent discount.

?We are looking into whether the allegations are true or not. We will ask Samsung to correct the practices if it unfairly sold the chips at a cheaper price to Apple than to domestic customers,? the Korean Fair Trade Commission (KFTC) said on Wednesay.

The investigation follows an announcement on Tuesday by Samsung and Hynix Semiconductor that they had won long-term contracts to supply Nand flash memory chips to Apple for its iPod Nano music players.

Apple will pre-pay Samsung and Hynix $500m and $250m respectively over the next three months for the five-year contracts. Samsung held talks with Apple this year about building a joint plant to produce Nand chips but the deal fell through.

Samsung has denied the allegations of unfair pricing. ?We have many deals with Apple. We may get less from one deal but more from another deal. So I think we get fair value overall,? Chu Woo-sik, head of investor relations, said last month.

The KFTC investigation will add to the pressure on Samsung, which is facing increasing competition from rivals such as Intel in the fast-growing chip segment.

On Tuesday Intel ann-ounced a deal to supply flash memory chips to Apple and unveiled a joint venture with Micron Technology to manufacture Nand flash memory chips, challenging Samsung on a technology that is becoming increasingly popular in consumer electronics devices.

Nand chips are in short supply as demand for large memory capacity increases. Hwang Chang-gyu, president of Samsung?s semiconductor business, said last week Samsung was able to meet only 50 per cent of demand from global electronics makers, such as Apple and Sony.

South Korean companies are major producers of Nand chips, with Samsung and Hynix having a combined 70 per cent market share.

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