Japan's Matsushita and Renesas Technology are likely to sign an agreement by the end of the year to process technology for 32-nanometre system chips.

The business daily Nikkei said that the move will split major Japanese chipmakers into two camps as Toshiba , NEC Electronics and Fujitsu  are likely to enter into a similar alliance to help reduce development costs, the Nikkei said.

So far  Toshiba , NEC Electronics and Fujitsu have refused to confirm this.

Under the deal technicians of Matsushita and Renesas will work to devise ways to fabricate fine circuits so that they will be able to make chips smaller and more energy-efficient than conventional versions.

Matsushita wants to put the chips in its flat-panel televisions and other high-performance home electronics.