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 popular Apple gadgets such as the iPhone, iPad and iPod.

Apple has been cutting its orders from Samsung as it tries to diversify its lines of supply for memory chips, 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, whose release is widely expected to be announced on September 12.

The report said Apple instead picked Japan's Toshiba Corp, Elpida Memory and Korea's SK Hynix to supply DRAM and NAND chips.

"Samsung is still in 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.

The source denied market speculation that the reduced orders from Apple were mainly due to 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.

The U.S. firm frequently faces a supply crunch when a new product is launched, triggering a consumer stampede that drives demand far in excess of supply and production capability.

Earlier this year, a source told Reuters that Elpida was selling more than half of its mobile DRAM chips to Apple.

Apple and Samsung are locked in a patent wrangle in 10 countries as they vie for market share in the booming mobile industry.

Apple won a landmark victory last month after a U.S. jury found the South Korean firm had copied key features of the iPhone and awarded Apple $1.05 billion in damages.

Samsung declined to comment and Apple was not immediately available to comment.

(Reporting by Miyoung Kim; Editing by Richard Pullin)

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