Share prices of the two companies surged in Tokyo trading following the announcement. Electronics giant Sony Corp., parent of the computer entertainment unit that makes the console, jumped more than six per cent, to top 10,000 yen.

Toshiba shares rose 40 yen, or 5.54 percent, to 762 in the heaviest trading volume on the first section of the Tokyo Stock Exchange. The companies said they would fabricate the new 128-bit processor, called the "emotion engine," at an existing Toshiba plant in Oita, Japan.

The companies worked together to develop the architecture for the processor. The new chip will be available in the fall of 1999. Reports have said the game machine's chip would bemore powerful than anything available in a personal computer. The companies claimed it would offer "speeds approaching the performance of a super computer in floating point calculations."

The next-generation PlayStation also will employ DVD technology in place of the CD-ROM drive in existing consoles, giving the machine the ability to play DVD movies or to play games with graphics on a par with the computer-animated movie "Toy Story." Toshiba will own 51 per cent of the yet-unnamed joint venture, with Sony owning the rest, the companies said.