Intel, the world’s largest chipmaker, and Cymer, a leading supplier of deep ultraviolet light sources used in semiconductor manufacturing, announced Monday that they had signed a development agreement for Intel to provide $20 million in funding over the next three years to accelerate development of production-worthy extreme ultraviolet (EUV) lithography light sources.

The main idea of extreme ultraviolet lithography is ability to “draw” substantially finer circuits on wafers when making chips than it is possible today.

EUV lithography is positioned for commercial deployment in 2009, but several issues must be addressed to keep the technology on track. A key issue confronting the commercialization efforts of EUV lithography is the ability to increase source output power to meet the wafer throughput requirements of high volume manufacturing, while minimizing the cost of ownership for EUV lithography tools. Another issue with EUV lithography is requirement for extremely precise mirrors.

Accelerating EUV technology development to enable its successful implementation in high volume manufacturing for the 32nm node in 2009 is a critical mission at Intel, according to Intel.

Further details of the agreement were not disclosed.