Japan's largest chip manufacturer Elpida has inked a silicon foundry business partnership with United Microelectronics Corp. The two memory manufacturers are looking for new business opportunities on the market in order to diminish their losses on the memory market.

According to the business agreement, the two companies will jointly offer contract chip manufacturing services on the Japanese market, thus threatening the position of the other important player on the semiconductors market - Toshiba.

Elpida is alleged to use UMC's production technology located at an advanced silicon foundry in Hiroshima, and will offer contract chip manufacturing services to other Japanese fabless companies. Elpida was born in 1999 as a memory division of the NEC and Hitachi joint-venture. It came at a time when conglomerates would spin off satellite DRAM chip companies in order to stay alive on a commodity market.

However, recent turnarounds in the memory business pushed companies to ask for the services of contract manufacturers. Recently, Sony signed an outsourcing agreement with Toshiba, that will produce chips for its PlayStation 3 gaming console.

''We believe that Elpida is an attractive outsourcing option for Japanese IC companies due to our close geographic proximity to them and the fact that Elpida does not compete in the same markets as our target foundry customers,'' said Yukio Sakamoto, president and CEO of Elpida, in a statement.

The joint effort will take place at Elpida's 300-millimeter wafer fab located in Hiroshima and extends with a research and development partnership signed previously in October 2007, for copper/low-k, DRAM, and phase-change RAM chips.

''Elpida will continue to focus on DRAM manufacturing for mobile devices and digital consumer electronics customers,'' he said. ''Overall DRAM business is very volatile, though. We believe continuous growth of our business is made possible through stable profit performance. Adding foundry as another axis of our business is a solution.''