Micron is buying flash memory maker Numonyx in an all-stock deal valued at about $1.27 billion.

Numonyx was ranked as the world's No. 3 maker of flash-type memory chips and was formed last year using memory chip assets from STMicroelectronics and Intel. The company specializes in mobile phone memory.

Micron's takeover of Numonyx could actually help their strategic relationship catch up with bigger rivals South Korea's Samsung and Japan's Toshiba and boost market share.

Micron will issue 140 million Micron common shares to Numonyx shareholders, Intel, STMicroelectronics, and Francisco Partners. STMicro said in a statement it will net around $527 million worth of Micron shares from the deal.

Micron Chief Executive Steve Appleton said the deal helps further diversify Micron's business amid the growing mobile device market as Smartphone memory needs grow, and lower-end cellphones with smaller memory become more ubiquitous in the developing world.

"We think we will clearly be the second-largest producer of memory. Obviously Samsung's still very strong, but we will start differentiating ourselves even more from the rest of those in the industry," he said.