Toshiba and SanDisk have started construction work on a ¥300 billion flash memory plant in Japan, the two companies said.

The factory is being built alongside existing Toshiba plants in Yokkaichi in Mie prefecture, western Japan, and is scheduled to produce its first chips in late 2007.

Toshiba will pay for the factory and Flash Alliance Ltd, a joint venture formed by Toshiba and SanDisk, will pay for the chip-making equipment and jointly operate the plant. Chips produced in the plant will be equally shared by the two companies.

Demand for flash memory chips is rising fast. The devices sit at the heart of many portable digital consumer electronics products, including music players, cameras and phones.

When production begins, the plant will be capable of processing up to 2,500 wafers per month. The wafers are 300 millimetres in diameter and thousands of chips can be made on each one. During its first year of operations, capacity will be steadily increased and the factory is scheduled to handle 67,500 wafers per month by the end of 2008.