IBM will pay Xilinx a royalty fee on the number of chips sold using their technology cores.

Researchers at Xilinx's Dublin facility will play a key role in developing new features for microchips following an innovative, but potentially risky, partnership agreement with technology giant IBM.

Xilinx, which designs and produces semiconductors and the software needed to programme these chips, has licensed to IBM its programmable logic technology for integration into its single application microchip product set. These type of chips, which are generally designed to perform a specific task, will gain the potential for some reprogramming once the research is completed by IBM and Xilinx.

Enabling IBM customers to programme parts of the chips to carry out different tasks will offer businesses greater flexibility. IBM has designed mainly single-application chips, which offer efficiency in the manufacturing process but little flexibility.

The hybrid chips will be supplied by IBM for use in a range of electronic devices, communications equipment and information storage systems to improve operating performance.

Research firm Gartner said the announcement was "very significant" as it was the first time a leading design company had licensed its programmable logic technology to another firm.

But it also said the licensing of this type of technology to another semiconductor firm was risky because programmable logic technology was considered the "crown jewel" of any firm.

Mr Brendan Cremen, director of engineering at Xilinx, said the company's relationship with IBM was robust and positive, adding the deal should benefit both firms and their customers.

"We produce a great product which isn't fixed for customers, so if they need to change something late in the cycle it is possible. You don't have to redesign the whole chip," said Mr Cremen. "IBM will be able to make chips which can be changed slightly using our technology rather than being only for a single purpose." He said there were safeguards written into the deal that would prevent IBM competing directly with Xilinx.

When development work is completed by Xilinx's Irish researchers, IBM should be able to pre-load onto its chips a small block of Xilinx's field programmable gate array technology.

Availability is scheduled for early 2004 and the firms will provide the software necessary to facilitate ease of use of the chips.

But of potentially greater benefit for the firm will be the use of its technology by a new range of potential customers, said Mr Cremen.

IBM is the biggest manufacturer of specific integrated circuit chips - microprocessors that are fixed for one purpose early in the design process.