Toshiba, Fujitsu and NEC Electronics have agreed to jointly develop advanced 32-nanometre chips to better keep up with rivals, the Nikkei business daily said on Wednesday.

The three firms had been in talks about shouldering the estimated 100-200 billion yen ($830 million-$1.66 billion) development costs to help compete against chip industry leaders such as Inteland Samsung Electronics.

The companies aim to set up a joint venture to make the chips, used in flat TVs and other high-power home electronics, with Toshiba expected to hold a leading non-majority share.

Chip makers are racing to halve the production cost per function of a chip every year or two -- a trend known as Moore's Law, named after a co-founder of Intel.

In May, Samsung, IBM, Chartered Semiconductor Manufacturing Ltd., Infineon Technologies and Freescale Semiconductor said they would work together on 32-nanometre chips.

Toshiba and NEC Electronics have teamed up to develop chips with 45 nanometre features.

Toshiba was the world's No.4 maker of chips in terms of revenue in 2006 and NEC Electronics ranked No.11, according to research firm iSuppli. Fujitsu ranked 27th, the paper said.