Employees are reflected on a wall with the logo of Samsung Electronics at its headquarters in Seoul in April 2006. The world's two largest memory chip manufacturers Hynix and Samsung will work together to develop next-generation semiconductors so South Korea can stay ahead of its rivals, the government said Thursday.

The world's two largest memory chip manufacturers will work together to develop next-generation semiconductors so South Korea can stay ahead of its rivals, the government said Thursday.

Samsung Electronics and Hynix Semiconductor will jointly invest nine billion won (9.46 million dollars) as part of a broader state-backed research and development programme, the Ministry of Commerce, Industry and Energy said.

The joint investment will help South Korean firms fend off a challenge from Japanese rivals in the next-generation chip market, the ministry said in a statement.

"For (South Korea's) continued leadership in the memory chip sector, Samsung and Hynix agree it is urgent to acquire a source of technology for next-generation memory chips," it said.

Under a seven-year programme that began in 2004, 52.58 billion won will be spent in total to help South Korea design and make spin torque transfer magnetic random access memory (STT-MRAM) and other non-volatile memory devices.

The government is footing 28.45 billion won of the total and hopes to use the technologies developed to seize 40 percent of the non-volatile memory chip market by 2012.

Samsung and Hynix plan to invest their share this year and next.

The ministry said in a statement the new chips promise greater potential for electronic devices because manufacturers can overcome the current capacity limits of flash memory units.

A South Korean employee of the Hynix Semiconductor walks past a logo of the company at a branch in Seoul. The world's two largest memory chip manufacturers Hynix and Samsung will work together to develop next-generation semiconductors so South Korea can stay ahead of its rivals, the government said Thursday.

Non-volatile memory devices such as flash memory units are gaining importance because they can store information even if power is turned off.

Samsung and Hynix will regularly exchange information on technological advances and evaluate each other's work, said Cha Dong-Hyung, head of the ministry's semiconductor and display division.

He said cooperation is crucial because Japan's Toshiba, NEC and Fujitsu have joined forces and agreed to spend three billion yen (28.3 million dollars) from 2006 to 2010 to develop STT-MRAM devices.

As South Korea was a late starter in the memory chip field, its firms have to pay hundreds of millions of dollars every year to companies like Intel and Toshiba that hold patents to DRAMs and NAND flash memory devices, Cha said.

It was hoped the firms could develop their own technologies to avoid future royalties.

Samsung said the rare tie-up with Hynix would help domestic companies take a global initiative in developing next-generation chips.

Daewoo Securities analyst James Song said Samsung and Hynix are getting their momentum from a rebound in memory chip prices from a prolonged slump.

© 2008 AFP