SEOUL, Sept 7 (Reuters) - Apple Inc (AAPL.O) has reduced its orders for memory chips for its new iPhone from its main supplier and competitor Samsung Electronics Co (005930.KS), a source with direct knowledge of the matter said on Friday.
South Korea's Samsung is a core Apple supplier, producing micro processors, flat screens and memory chips - both dynamic random access memory (DRAM) chips and NAND memory chips - for the iPhone, iPad and iPod.
Apple has been cutting back its orders from Samsung as it seeks to diversify its memory chip supply lines, although the South Korean firm remains on the list of initial suppliers for the new iPhone, the source told Reuters. The person declined to be named because the negotiations are confidential.
The Korea Economic Daily, citing an unnamed industry source, reported on Friday that Apple had dropped Samsung from the list of memory chip suppliers for the first batch of the new iPhone, the iPhone 5, which is widely expected to be unveiled next Wednesday. The report said Apple instead picked Japan's Toshiba Corp (6502.T), Elpida Memory ELPDK.PK and Korea's SK Hynix (000660.KS) to supply DRAM and NAND chips.
"Samsung is still on the list of initial memory chip suppliers (for new iPhones). But Apple orders have been trending down and Samsung is making up for the reduced order from others, notably Samsung's handset business," the Reuters source said.
Samsung's handset business, led by robust sales of its flagship Galaxy line of products, has become the most important earnings pillar, bringing in around two-thirds of Samsung's overall profit, and is driving sales of component - from memory chips to micro processors and displays.
Samsung, the world's top smartphone maker, said on Thursday that sales of its Galaxy S III smartphones topped 20 million since its late-May debut.
The source denied market speculation that the reduced orders from Apple were prompted by a souring relationship between the two companies, which are locked in global patent disputes, and said Apple had already been looking to widen its supply chain.
Bernstein analysts estimate Apple's purchases of mobile DRAM and NAND chips from Samsung have fallen significantly and now only account for around 2.5 percent of Samsung's 2012 earnings.
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