A Japanese university has developed a new microchip manufacturing process which could cut the cost of producing next-generation chips by 90 per cent, the school's researchers said.

The prototype equipment employs a new circuit etching system which can improve yields by 20 per cent in the production of 256-megabit dynamic random access memory (DRAM) chips, they said. The current industry standard is still with 64-megabit chips.

"The overall production costs can be brought down to one-tenth that of the currently used method," said a researcher with the team at Tohoku University, in northern Japan.

Tokyo Electron, which will work on the project, saw its share price jump this week to rise 120 yen or 2.8 per cent to 4,360 (£22) yen on the Tokyo stock exchange. The university said it will start commercial shipments in 1999.

Japanese manufacturers, facing falling prices in the semiconductor market, have been reluctant to fork out the heavy spending needed to mass produce the 256-megabit chips. Under the current technology clean rooms, where the delicate production is carried out, would have to be doubled in size to make the next-generation chips. The university's work should eliminate that need.