Nvidia will supply the graphics chip for the successor to the PlayStation 2 games console being developed by Sony Computer Entertainment (SCEI).
The deal also gives SCEI's parent, Sony, the right to use the chip in its digital consumer products.
The chip will include a version of Nvidia's GeForce processor and be made in Japan at a Sony factory in Nagasaki and at Oita TS Semiconductor, a joint venture between Sony and Toshiba that manufactures parts for the PlayStation 2.
The companies did not say what type of GeForce processor would be used, or when production will start.
The graphics processor is one of two chips that will drive the performance of the much-anticipated PlayStation 3 console. The other chip is the multicore, 64-bit Cell microprocessor that has been under development since 2001 by Sony, IBM and Toshiba. Samples of those chips will be available in the first half of 2005, the companies said last month.
SCEI has not said when it would start shipping the PlayStation 3, but analysts and industry watchers believe the games console will be in shops by the middle of 2006.
Nvidia and ATI Technologies have been competing over which company would supply the graphics processor for the PlayStation 3. ATI earlier this year won a contract to supply its processors for the next-generation Xbox console, which competes with the PlayStation 2, and is made by Microsoft.