To design cutting-edge system chips, but to outsource their production to Samsung
The company is restructuring its operations after the business saw an operating loss of 280 billion yen ($3.4 billion) in fiscal 2008 due to global economic turmoil, Reuters reported.
Toshiba will design cutting-edge system chips for new orders in April, but will outsource production to Samsung to avoid capital cost which the company sees as a heavy investment.
The deal between Toshiba and Samsung is expected to free up resources for other projects.
Toshiba said it would sell its Nagasaki system chip production line that produces chips for Sony PlayStations and is housed in a Sony owned factory to Sony at an estimated cost of 50 billion yen.
According to a report in Nikkei business daily, Samsung was chosen by Toshiba as it has advanced technologies and the ability to produce large numbers of high-performance chips at low cost.
System chips division of Samsung has seen strong growth this year, with the division reporting 4.8 trillion won revenue in the first nine months of 2010 as compared to 4.4 trillion won for all of 2009.