Toshiba said this morning it has shrunk the size of its 128Gbit NAND flash memory chips, in the race to bring increased capacity to products like USB storage and memory cards.

Together with partner SanDisk, the company said it is shipping the world's smallest 128Gbit memory chip, with an area of 170 square millimeters. The chip uses a 19-nanometre technology process, one step smaller than a 20nm chip announced by Intel and Micron in December.

NAND flash memory, which holds data even when not powered, is used for storage in smartphones, music players, and increasingly in super-thin laptops such as Apple's MacBook Air and Intel-powered ultrabooks. Smaller chip sizes allow for smaller devices, but also drive down overall prices by allowing them to be more efficiently produced and forcing less advanced manufacturers to cut prices.

Toshiba's newest chip uses a storage method called three bits per cell, which is more efficient but less reliable than two bits per cell, meaning it is likely be used initially in products like memory sticks and cards. A cell is a single unit of storage on a chip.

Toshiba, which is a major supplier to well-known companies like Apple, said it began mass production of the new chip this month.

Toshiba and SanDisk share research and development and jointly invest in manufacturing.

The two companies are in a race with rivals such as Intel, which partners with Micron Technology, and with Samsung to continuously crank out smaller chips, a battle that requires massive spending on production equipment.