Elpida will buy 100 percent of the memory chips produced by the plant in eastern Suzhou City which will be jointly owned with China's Suzhou Venture Group Co., the Japanese firm said in a statement.

The move comes amid growing demand for computer chips for use in electronic products such as mobile telephones, computers and cameras. The semiconductors are expected to go into goods mainly for the Chinese market.

Elpida chief executive Yukio Sakamoto said it was "critical" to invest in the rapidly growing Chinese market.

"This joint venture opens an opportunity for Elpida to strengthen its production and marketing profile in China and the entire Asian market," he said in the statement.

"In addition, we can accomplish cost efficient investments based on shared capital expenditures and shared business risks," he added.

The facility, which is expected to start operating in early 2010, will initially churn out 40,000 wafers a month, rising to 80,000 at a later stage, it added.

The Japanese company plans to take a stake of 39 percent in the venture, with the rest held by its Chinese partner, and possible third party investors.