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Samsung renews chip license with SanDisk

SEOUL (Reuters) - Samsung Electronics on Wednesday said it had renewed its NAND flash memory chip license with SanDisk for seven years, at a lower royalty rate, while guaranteeing a portion of its chips output to SanDisk.

"Although some information cannot be disclosed due to an agreement between the two parties, the royalty rate will be about half the rate applied in the existing contract," Samsung said in a filing to the Korea Exchange.

"We are very pleased with the agreements announced today. Furthermore, continued access to Samsung's flash capacity under competitive terms gives us greater flexibility in managing our future capital expenditures, SanDisk chairman and CEO Eli Harari said in a joint statement released later on Wednesday.

The new agreements would become effective when the current cross license and supply agreements expired on August 14, 2009, and would run for seven years from that date, the statement said.

In an interview conducted last week at the Reuters Global Technology Summit in New York, Harari had described the renewal negotiations as "quite intense."

He had indicated the possibility of litigation if an agreement was not reached, as Samsung and its customers would then be infringing patents that SanDisk holds.

Samsung, the world's top maker of NAND flash memory chips, pays about $350 million a year in royalties to SanDisk for its patented technology, widely used in digital cameras, music players and other electronic devices.

Last year, SanDisk spurned an unsolicited buyout offer from Samsung for $26 per share, saying the offer undervalued the company. Samsung dropped its bid in October, citing SanDisk's deepening losses and uncertain outlook.

(Reporting by Marie-France Han and Seo Eun-kyung; editing by Jacqueline Wong an Chris Lewis)