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The Korea Times newspaper said that Apple decided to withdraw after Korean authorities said they were considering an investigation into allegations of unfair pricing practices by Samsung.

Neither party was prepared to say why the discussions were curtailed.

'Talks didn't proceed beyond the preliminary stages,' said Sungin Cho, a Samsung spokeswoman. 'We're not commenting on the reason that talks didn't develop.'

The Korea Times said a deal could have resulted in a joint investment in NAND production worth $3.8bn.

The Korean Economic Daily said that Apple is now holding talks with another, as-yet-unnamed company with regard to investing in flash production in the US.

Apple is believed to have tied up 40 per cent of Samsung's output in order to guarantee supplies for its iPod nano portable music players. However demand for the players is already outstripping supply with shipping time of one to two weeks on the 4GB model.