Intel recognises the flash memory chip market as a key growth area

Intel and Micron are teaming up to make the memory chips used in many MP3 music players and digital cameras, a market currently dominated by the Asian firms.

Samsung's shares closed down 5% on Tuesday while Toshiba fell 8%.

Analysts said the drops were expected and predicted that the Asian chipmakers would see their stock recover.

Competitive market

Demand for flash memory chips is growing by 30% a year.

The appeal of the chips is that they retain memory even when power is turned off.

They are used in Apple's recently introduced iPod Nano.

"The Intel-Micron partnership means a far more competitive market for the NAND flash chip, which will of course pose a drag on local chipmakers for some time," said Dongbu Securities analyst Lee Jeong.

"But given the technology edge enjoyed by Samsung and Hynix, such a negative impact will not last long."

Korea's Samsung and Japan's Toshiba saw their shares fall despite both also securing a giant new long term order from Apple.