Intel and STMicroelectronics are to set up the largest maker of the chips which store software in mobile phones. It is understood the deal will not have any impact on jobs in Ireland where Intel employs 5,500.

Intel and STMicroelectronics plan to combine their unprofitable flash-memory businesses into a new company. The agreement, which includes an investment by US-based buy-out fund Francisco Partners, allows the companies to exit a business that has been hurt by competition.

Price cuts on memory chips led both companies' units to report a drop in revenue last quarter. The combination will create a company with $3.6 billion in annual sales, bigger than current market leader Spansion.

By merging operations, STMicro and Intel can pare expenses and create products that unite different types of semiconductors, Intel Vice President Brian Harrison said on a conference call today.