According to a Nikkei newspaper report, the biggest Japanese chipmaker Toshiba Corp intends outsourcing the production of some of its large-scale integrated (LSI) circuits to an overseas foundry.

The under-consideration move of outsourcing the production of its cutting-edge 28-nanometre system chips would essentially help Toshiba slash its manufacturing costs. For the contract out, the company would soon enter into negotiations either with Singapore's Chartered Semiconductor Manufacturing, or US' Globalfoundries or some other prospective partners.

The Nikkei report said that the Toshiba's outsourcing deal would likely come through this fiscal year. Under the terms of the proposed deal, the development and designing of the 28-nm system chips will be done by Toshiba; while the manufacturing of the chips will be outsourced.

Going by Toshiba's first quarter earnings' report, LSI devices - which merge numerous functions on a single chip and are used in automobiles and electronics, like flat- panel televisions and game consoles - comprised 5.3 percent of Toshiba's total quarterly revenue. In 2008, Toshiba's system chips accounted for 40 percent of its sales of nearly 1 trillion yen.

While Toshiba had said on August 5 said it may outsource all its system LSI production; in a recent statement to the Tokyo Stock Exchange, the company reiterated: "We are considering outsourcing any system LSI output that exceeds our production capacity, but nothing has been decided at the moment."