Toshiba Corp will outsource production of some non-memory chips to Samsung Electronics Co, the South Korean electronics maker said, freeing up Toshiba's resources for its mainstay memory operations.
Toshiba also said it would sell to Sony Corp its system chip production line in Nagasaki prefecture, a deal which an industry source has estimated at 50 billion yen.
Jiji news agency also reported on Friday that Toshiba plans to spend more than 100 billion yen ($1.2 billion) to build a factory to make LCD panels.
The Toshiba-Samsung deal marks a rare alliance between the two rivals but fits into Toshiba's attempt to restructure its loss-making chipmaking operation and Samsung's strategy of expanding into microprocessors.
System chips, used in digital devices, have seen explosive demand growth this year, due to rising popularity of smartphones, tablet PCs and Web-to-TV devices.
For new orders starting in the next fiscal year beginning in April, Toshiba will design cutting-edge system chips but will outsource production to other firms, to avoid costly capital investment outlays, the Japanese company said.
Toshiba, the world's No.3 chipmaker behind Intel Corp and Samsung, is trying to restructure its chipmaking operations after the business logged an operating loss of 280 billion yen ($3.4 billion) in fiscal 2008 amid the global financial crisis.
Toshiba is the world's No.2 supplier of NAND flash memory chips with a 35.7 percent market share, trailing Samsung, which controls 40 percent of the market, according to industry tracker DRAMeXchange.
(Reporting by Mariko Katsumura, Antoni Slodkowski in TOKYO, Miyoung Kim in SEOUL and Divya Sharma in BANGALORE; Editing by Muralikumar Anantharaman and Edwina Gibbs)