U.S. software giant Microsoft said Tuesday it will set up its first joint research facility with another company, Chinese partner Lenovo Group, in Beijing, an unprecedented move with an investment of several million dollars a year.

The facility will be based in Lenovo's research and development center in the capital, with around 40 engineers from Lenovo and tools, training and some staff from Microsoft.

The announcement came a day before Microsoft Chairman Bill Gates' 10th visit to China as the software behemoth considers its future here.

"Based on our common understanding that personal computers will extend to every part of people's work and life, we believe our cooperation will bring many many opportunities to Lenovo and Microsoft," said George He, senior vice-president and chief technology officer of Lenovo.

Craig Mundie, chief research and strategy officer at Microsoft, said the two companies will try to identify opportunities in the consumer and mobile markets such as digital photography, digital media and the Internet.

He said the joint center will develop products for Lenovo in areas like corporate computing, digital homes, Windows value-added services, as well as ultra-portal computing devices and smart handheld devices.

The two companies will share intellectual property generated from the joint center and Lenovo will also be able to use the results in its research and development facilities in the United States and Japan.

"We figured out this cooperation around the dining table for our New Year gathering, as both Microsoft and Lenovo were thinking about where we should go, after making significant achievements on personal computers," said Tim Chen, senior vice-president of Microsoft and chairman and CEO of its Chinese operations.

Lenovo, with over 30 percent of the market share in China, has played a critical role in Microsoft's success in the world's second-largest computer market.

It was the first Chinese computer vendor to announce in 2005 that it would only use legitimate operating systems on its computers. Last year alone, Lenovo sold five million units of computers with Microsoft Windows operating systems, out of its total shipment of eight million units.

While Lenovo will get technological support from Microsoft in the joint center, Lenovo will help the US software giant to learn the habits of consumers and extend its control in the market from computers to other devices.

Lenovo's He said China has become one of the most sophisticated markets in the world in terms of the complexity of IT tasks of Chinese institutions like banks and telecom operators, as well as the maturity of high-end users.

He said Lenovo has rich experience and influence on customers, which will be helpful for Microsoft.

The world's largest software firm also signed a deal with Chinese consumer electronics firm Amoi Tuesday to develop smart phones.