IBM is to work with German chemical company BASF to produce a new generation of 32 nanometre chips.
The partnership will produce chips scheduled to reach the market in 2010, IBM said.
Chips with 32nm circuits and other features use less electricity and are smaller than 45nm or 60nm chips, allowing manufacturers of smartphones, laptop PCs and other electronics to pack more processing power into their products.
The two companies hope to create an improved approach to using chemicals in lithography, a method of manufacturing chips by stacking layers of different materials like a cake, then etching away part of each layer to create the tiny components of a microprocessor.
Work will begin immediately at IBM's New York plant and BASF's headquarters in Germany, said Ronald Goldblatt, a distinguished engineer and senior manager at IBM Research.
BASF already supplies chemicals to many chip makers, but under the new partnership it will also share its employees and expertise with IBM.
Most of the synthesis and testing will be done by BASF, with prototyping and application work carried out at IBM, Goldblatt said.
IBM plans to use the new chemicals across its entire range of products, which include its Power6 high-end server chip announced on 21 May, a variety of application specific integrated circuits for telephony backbone platforms, and its Cell Broadband Engine chip used to process high-end graphics data in gaming consoles.
The BASF deal marks an expansion of IBM's strategy of collaborating with partners to design new chips instead of doing all the work itself. IBM used the same approach when it created the Cell chip by collaborating with Sony and Toshiba.
On 23 May, IBM said it would collaborate with a larger group of chip makers on 32nm semiconductor production technologies. That group includes Chartered Semiconductor Manufacturing, Freescale Semiconductor, Infineon Technologies and Samsung Electronics.
IBM is also using the new deal to ratchet up competition with Intel, which plans to bring its own 32-nm architecture chips to market by 2009. The two companies have been locked in an increasingly public race to design faster chips since they both picked the same day in January to issue news releases about advances in "high-k metal gate" technology. That approach employs rare materials to construct smaller, more efficient transistors than the silicon dioxide used in modern chips.
Intel insists it leads the industry in this area, with plans to use the new technique to launch its 45nm "Penryn" chip in the fourth quarter of 2007, while IBM and its partner Advanced Micro Devices do not plan to sell 45nm chips until the middle of 2008.
Texas Instruments also entered the contest on 13 June, announcing a plan to use high-k materials in 45nm chips, also beginning production in the middle of 2008.