April 26 (Reuters) - Atomera Inc, a Silicon Valley firm with a new material for improving semiconductors, on Wednesday said it has signed a deal with STMicroelectronics NV under which the European chipmaker could start using Atomera's technology in production.

Atomera said the deal allows STMicro to install Atomera's technology in its factories, and manufacture and distribute chips made with it. The companies did not disclose terms of the deal.

Atomera has developed a new material that can slot into existing semiconductor manufacturing processes to improve transistors, the tiny electrical switches at the heart of all chips. Atomera claims its material in some cases can improve transistors as much as jumping to a new-generation technology, but with lower costs.

Atomera's business model is to license the technology to chip makers and then collect a small royalty on each chip made with the technology. But chipmakers integrate such new technologies quite slowly, and none of the two dozen or so companies that Atomera has engagements with are yet using its technology in mass production.

Atomera Chief Executive Scott Bibaud told Reuters that STMicro, with the new deal, is now Atomera's closest customer to moving to mass production. Bibaud said there is no firm timeline for when chips with Atomera technology will be in production, but it could be within 12 to 18 months.

"The license contemplates what the royalty payments will be to us when that happens," Bibaud said. (Reporting by Stephen Nellis in San Francisco; Editing by Leslie Adler)