Toshiba and SanDisk have agreed to build a new memory chip plant in Japan to keep pace with surging demand for NAND flash memory, they said Wednesday.

NAND flash is used in a growing number of portable digital media devices including still cameras, music players and cell phones. It is also being used to make flash memory cards.

Construction of the chip plant, called Fab 4, will begin in August, with initial production scheduled for the fourth quarter of 2007, the companies said. The plant will be able to process 300-millimeter diameter semiconductor wafers.

Toshiba declined to say how much the companies will invest in the plant, although it said it would pay to construct the building and both companies will pay for the manufacturing equipment. The factory will be built at Toshiba’s facility in Yokkaichi in central Japan, where the two companies already carry out flash memory production.

The plant will be on the same scale as the recently opened Fab 3 plant, they said. When that factory opened last year, Toshiba said it would be able to process 40,000 wafers per month by the end of the first half of 2007. Thousands of memory chips can be produced on one wafer.

Toshiba is the world’s second-biggest NAND flash maker by sales, according to a recent estimate from IDC. It racked up sales of US$2.4 billion in 2005, up 18 percent from 2004, for a 22 percent share of the world market, IDC said. Market leader Samsung Electronics managed sales of US$5.9 billion, while number-three-ranked Hynix Semiconductor had sales of US$1.3 billion, IDC said.

-Martyn Williams, IDG News Service

For related news coverage, read Toshiba Launches 1st HD-DVD Player in Japan.

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