Taiwan Semiconductor Manufacturing Co. and US computer chip maker Intel Corp. announced on Monday that they have forged an alliance that will allow TMSC to use Intel's tiny Atom microprocessors.

Intel, the world's largest chip manufacturer, and TMSC described the agreement in a joint statement as "an important step in a long-term strategic technology cooperation between Intel and TSMC."

"The compelling benefits of our Atom processor combined with the experience and technology of TSMC is another step in our long-term strategic relationship," Intel president and chief executive Paul Otellini said.

Intel said the agreement with TMSC should "significantly broaden the market opportunities" for its Atom processor, which was unveiled last year and is used in a wide variety of electronic devices, from smartphones to netbooks.

The Atom features 47 million transistors and is Intel's smallest processor.

"We expect this collaboration will help proliferate the Atom processor ... and foster overall semiconductor growth," said Rick Tsai, president and chief executive of TSMC, which operates the world's largest dedicated semiconductor foundry.

The agreement with TMSC is unusual for the Santa Clara, California-based Intel as it tends to tightly control everything from computer chip design to manufacturing.

The alliance comes at a difficult time for the semiconductor industry and is aimed at expanding the use of the Atom in electronic devices.

Market research firm Gartner expects worldwide semiconductor revenue to drop 24.1 percent this year to 194.5 billion dollars while another firm, IDC, has forecast that the semiconductor market will erode 22 percent this year.

Gartner also reported on Monday that sales of personal computers are expected to decline by 11.9 percent to 257 million units in 2009, the steepest drop in the industry's history.