The investment arm of chip maker Intel has agreed to invest $65 million in Powertech Technology, a Taiwanese chip assembler that specialises in flash memory and DRAM (dynamic RAM).

Intel Capital said the funds, along with capital from other investors Powertech expects to bring on board, will be used as working capital to support the continued growth of its operations. Intel is an active customer of Powertech, it said in a statement, and led the round of financing for Powertech.

The announcement came as no surprise in Taiwan, where Chinese-language media had been reporting such a deal between Intel and Powertech was in the works.

The investment is one indication of how competitive the NAND flash memory chip business has become, and the importance of Powertech's services.

Intel entered the NAND flash memory fray by partnering with Micron Technology, a deal the two companies announced in late 2005, and started early last year under the name IM Flash Technologies. They entered an already competitive industry that included South Korean heavyweights Samsung Electronics Co. and Hynix Semiconductor, as well as NAND flash developer SanDisk.

Flash chips have become popular thanks to widespread use for song storage in digital music players, including Apple's iPod shuffle and iPod nano.

One bottle-neck in NAND flash production is in chip assembly, where companies seal the chips inside protective coverings, the final step in the making of a chip. Powertech specialises in memory chip assembly, including NAND flash memory as well as DDR2 (double data rate, second generation) DRAM chips.

The NAND business has hit a few speed bumps recently. The popularity of the chips caused companies to build too many new NAND production lines, causing a glut of chips on the market and sending prices tumbling.

SanDisk announced a few weeks ago that it planned to lay off 10 per cent of its work force in a bid to remain profitable despite steep price cuts on its chips.

The Milpitas, California company said NAND flash memory chip prices have dropped 50 per cent in the last two months.