Two Taiwanese chipmakers have teamed up to meet surging demand for flash memory.

Powerchip Semiconductor, Taiwan's largest dynamic RAM (DRAM) maker, will work with Macronix International to co-develop 100-nanometre (nm) manufacturing technology as the first step in a five-year technology research partnership.

Macronix will also farm out production of some of its chips to Powerchip, a deal expected to last seven years, the two companies said in separate statements.

Powerchip said it would pay Macronix $NT5.3 billion ($US163.5 million) for an advanced, 300mm chip plant. Macronix built the shell of the plant years ago, but a chip industry downturn caused the company to delay outfitting it with production equipment.

"Demand for [flash memory] is rising faster than our current facilities can keep up with, so we needed this to facility to help us seize this business opportunity," Powerchip said in a statement to the Taiwan Stock Exchange.

Chip manufacturing technology is measured in nanometres, a description of the size of the smallest feature that can be created on the chip's surface. A nanometre is a billionth of a meter.

The 100nm chip technology Macronix and Powerchip plan to develop is not as advanced as the 65nm production lines already in use at some companies.

Advances in chip production technology jumps are important because they enable chips to be made smaller, speedier and more energy efficient.

Macronix develops NOR flash memory chips, which are most commonly used in mobile phones, as well as read-only memory (Mask ROM) chips.