The multi-billion-dollar flash memory deal between Apple Computers and South Korea-based Samsung Electronics--believed to be a building block for Apple's rollout of the flash-based iPod Nano--has been scrapped, Samsung confirmed to MP3.com today.

The companies had been in negotiations for a joint $3.8 billion investment in flash chip production in South Korea, as Apple's new pencil-thin iPod Nano--both thinner and smaller than its predecessor, the iPod Mini--uses flash memory.

But a Samsung spokesman said today that the companies ended talks "at a very early stage," and the Korea Economic Daily reported that Apple is now talking to a US flash memory maker.

The news comes less than a week after Samsung agreed to pay the US Department of Justice a $300 million fine to settle accusations it secretly conspired with industry rivals to fix prices of some chips and force consumers to pay higher prices.

In addition, the Korea Times reported that Apple pulled out of the deal after hearing that South Korea's Fair Trade Commission could investigate Samsung for selling chips to Apple at below-market prices. Korean media reports have indicated that Samsung has been supplying Apple with 2-gigabyte and 4-gigabyte flash memory chips to Apple at half their market value.

Others have cited political and civic opposition to Samsung in South Korea.

The Korea Economic Daily quoted a senior Samsung official as saying, "As the anti-Samsung sentiment has recently deepened among some political and civic groups, Apple ended the talks, complaining about the sentiment."

Apple had planned to buy as much as 40 percent of Samsung's flash memory output in the second half of this year. It is unclear how the collapse of the proposed joint investment deal will impact that order.

Apple reported last week that it sold 1 million units within 17 days of shipping the iPod Nano music players.