IBM and Advanced Micro Devices (AMD) have signed a three-year extension onto their December 2002 collaboration agreement that could see the two companies work on chip-making technologies based on a 32 nanometer process.
The agreement was set to expire at the end of 2005, but now extends until 31 December 2008.
Under the revised agreement AMD will pay IBM between $250m (£139m) and $280m over the next four years. In exchange, IBM will continue to host the research and development work at its New York facility.
"It's a sign that our relationship with IBM is going very well and this has benefitted both companies," said Karen Prairie, an AMD spokeswoman.
The most advanced chip-making processes today can create wires on a microchip that are as small as 90nm, but IBM and AMD were collaborating on techniques to shrink them even further.
"We were already collaborating on 65nm and 45nm technology," said Chris Andrews, an IBM spokesman. "Now we've also added joint development on 32nm technology to the agreement."
Although both IBM and AMD maintain chip-making foundries, the updated agreement gives AMD the right to have a third party manufacture chips based on the jointly developed technology, Andrews said.
AMD has also now licensed IBM's C-4 "flip chip" packaging technology, which is used to connect the microprocessor to the circuit board on IBM's server processors, Andrews said.
AMD and IBM have also worked together on the silicon-on-insulator technology that is used in AMD's Opteron processors, he said.
With the business of manufacturing microprocessors steadily becoming more complex and expensive, many suppliers have turned to partnerships to defray costs.
Hewlett-Packard, for example, partnered with Intel on the development of the Itanium microprocessor that is at the heart of HP's Integrity systems. And earlier this year, Sun Microsystems announced that it would stop development on its next generation UltraSparc V processors in favour of chips built by Fujitsu.
Last week industry research firm Gartner prediced that the number of companies involved in the semiconductor industry would shrink by 40% over the next ten years, largely as a result of the increasing cost and complexity of the business.
"Increasingly these more advanced technologies, like the move to 65nm and the move to 45nm are going to be very challenging," said Andrews. "If you have a skilled partner with whom you can share the investment, it helps."
Robert McMillan writes for IDG News Service