NEC and Toshiba have decided to work together on a future generation of semiconductor manufacturing technology, they said Wednesday.

The two companies will jointly develop technology that can produce chips whose smallest features are 45 nanometres in size. A nanometre is a thousandth of a millimetre, and chip production technology is measured by the size of the smallest feature it can support. At present, most advanced chips are made on 90nm production lines, although Intel has introduced technology that works down to 65nm.

Toshiba, NEC, Sony alliance?

Toshiba disclosed in early 2004 its plans to work together with Sony on 45nm technology. Now, with Toshiba announcing similar plans to work with NEC Electronics on the same technology, there is a chance that the three companies will end up working together, Makoto Yasuda, a spokesman for Toshiba in Tokyo, said on Thursday.

Talks have not taken place yet on a three-way cooperation deal but the idea has not been ruled out, said Yoshikazu Ochiai, a Sony spokesman in Tokyo.

Chip companies are always trying to improve their production technology because each advance can cut costs and bring big benefits for users. Because everything on the chip is smaller, the entire package can be reduced in size, or more components can be crammed into a chip of the same size to make it more powerful. In some cases, several chips can be consolidated into one, meaning portable gadgets can be made more compact, and in most cases power consumption is reduced.

Cooperation on a cost drive

However, it is becoming harder and harder to push the boundaries of chip development, and that's leading companies work together to share costs and cut development time.

"It's more difficult so some companies, especially those that have less money or resources, should work together," said S.K. Kim, a semiconductor analyst at IDC.

Wednesday's agreement was sparked by talks that began in September at the request of NEC, said Sophie Yamamoto, a spokeswoman for NEC. In late October, NEC said its sales were down 17 per cent in the April to September quarter compared with the same time last year, and it also lost ¥7.9 billion in the period. At the same time, the company said it expects to post a ¥20 billion net loss for the year.

Few details of the collaboration have been finalised, but the two companies hope to have a definitive deal by the end of the year. Engineers from both companies will work together at Toshiba's Advanced Microelectronics Centre in Yokohama, west of Tokyo, the companies said.