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South Korea’s Samsung Electronics said on Monday it was in in talks with Japan’s Sony to supply flash memory chips.

The move would represent the latest potential link-up between the world’s two biggest consumer electronics groups.

It would also significantly strengthen Samsung’s dominance in the flash memory market, where demand is outstripping supply due to the growing popularity of portable electronics devices such as MP3 players, digital cameras and mobile phones.

News of the talks lifted Samsung shares to a record high of Won663,000 in early trading on the Seoul bourse before they slipped back to end the day 1.4 per cent higher at Won654,000.

Sony is seeking Nand chips with eight or more gigabytes of flash memory for MP3 players that it is planning to unveil next year, as it tries to catch up with
rival Apple Computer in portable digital music.

Yoon Hyuk-jin, an analyst at Korea Investment & Securities said: “It’s a win-win deal for both sides because Sony can get a stable supply of Nand chips at a cheaper price [by bulk ordering] and Samsung will have another big buyer.”

A deal is also expected to strengthen business ties between the two companies, which have a joint venture making flat screens and share patents on a range of basic technologies. “We are considering signing contracts to supply Nand flash chips to major companies, including Sony, but nothing has been decided yet,” Samsung said in a filing to the Korean stock exchange.

The company declined further comment but the Korea Economic Daily newspaper said the two sides were likely to sign a contract in early next year under which Samsung would sell more than a fifth of its total Nand output to Sony.

The talks follow a $500m (£288m) deal between Samsung and Apple in November to supply Nand chips for the iPod Nano player, which Apple’s competitors said would create a shortage of the chips in the sector.

Market researcher iSuppli said Samsung sold as much as 40 per cent of its Nand output to Apple in the second half of this year.

Copyright The Financial Times Limited 2017. All rights reserved.
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