Toshiba, Fujitsu, NEC Electronics and Renesas Technology have agreed to standardise on technology to make chips with a circuitry width of 45 nanometres or less.

Most of the world's advanced chip factories currently produce processors with a circuitry width of 90 nanometres. Finer circuitry will decrease chip size and enable data to be processed faster.

Production costs per chip will also be reduced, which should benefit the industry as costs for development and production equipment have escalated as circuitry has become more intricate.

Industry watchers have said that Japanese chip manufacturers need to join forces to claw back their competitiveness to tackle bigger rivals such as Intel, Samsung and Texas Instruments.

The deal between the four firms will most likely see mutual use and consolidation of their plants in the future.

But some observers hold out little hope for the union. Business daily Nihon Keizai Shimbun insisted that the joint venture is unlikely to make any money and will soon be scrapped.