Fujitsu and AMD will set up a joint venture, FASL LLC, in September in California to integrate their flash memory chip businesses. AMD will own a 60 percent stake in the firm with the rest taken by Fujitsu, the two said in a statement.

"We are putting our flash memory operations under one company and we believe it will help us become more competitive in the global market," said Yuichi Ikeda, a spokesman for Fujitsu.

The new company will be capitalized at one billion dollars and sales are targetted at 1.5 billion dollars, the business daily Nihon Keizai Shimbun said Tuesday. Fujitsu declined to confirm the figures.

The new company will employ some 7,000 staff from the two firms and its board of directors will comprise six AMD members and four from Fujitsu, the statement said.

Fujitsu and AMD already collaborate in the flash memory chip business after setting up an equally owned joint venture in Japan in 1993.

Haruo Sato, a semiconductor analyst at Tokai-Tokyo Research Center, said the integration was vital to both companies' survival in the fiercely competitive flash memory market.

"Chip makers are struggling with a global economic downturn and a continued fall in prices," Sato said.

"It is the same case as with DRAMs (dynamic random access memory chips) in that only five top companies can survive in the flash memory market. Before it is too late, the two want to secure the number two spot in the global market," the analyst said.

Flash memory chips can retain data even when the power is off. They are an integral part of most electronic devices including mobile phones and digital cameras.

Shares in Fujitsu rose five yen or 1.6 percent to close at 325 yen Tuesday.

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