The firms hope to further reduce the size of their products

The chip-manufacturing plan would enable them to compete with industry giants such as Intel and Samsung.

The group is to invest 100bn yen ($851.6m; �492m) to create a production line in Japan, and reports say they will invite other chipmakers to join.

The aim is to produce small fast chips that use less power and will enable the further shrinking of electronics items.

In January the three chipmakers will set up the venture to assess the feasibility of the project.

It is understood the provisional plan would see a production line built at a Toshiba or Renesas factory with manufacturing starting in early 2007, the Nihon Keizai business newspaper said.

Global market

According to reports in Japan, the new venture hopes to make system LSI (large-scale integration) chips with a circuitry width of 65-nanometres or less.

Most advanced semiconductor plants use circuitry of 90 nanometres. A nanometre is one-billionth of a metre.

Intel recently announced plans for a $3.5bn 45-nanometre semiconductor factory in Israel.

It is the biggest global chipmaker, controlling about 15% of a market worth more than $200bn a year.

Japanese firms have been forming alliances for development of system chips to save costs.

Hitachi revealed three months ago it was in talks with other Japanese chipmakers on possible steps to cut costs and boost competitiveness, including the joint chipmaking plant.