Toshiba Corp., NEC Electronics Corp. and Fujitsu Ltd. are considering development of 32-nanometer advanced system to offset research costs and better compete with rivals the companies said on Wednesday.

The Nikkei business newspaper said that the three companies have reached an agreement to jointly develop large-scale integrated, or LSI, chips for use in flat-panel televisions and other digital electronic appliances.

Toshiba and NEC Electronics recently extended their cooperation on development of the current generation of 45-nanometer chips, so a move to 32-nanometer development would be a natural next-step.

Combining forces would allow the firm's to fend off stiff competition from American rivals, Intel and IBM.

In May, a partnership including IBM , Samsung and Chartered Semiconductor Manufacturing said it would extend its joint development to 32-nanometer from 45-nanometer products.

Global chipmakers are under pressure to quickly roll out smaller and more advanced chips as consumers search for gear with more power.