Toyota said Friday it will establish a new $1 billion research and development unit focusing on artificial intelligence in Silicon Valley in the United States.

"Toyota believes artificial intelligence has significant potential to support future industrial technologies and the creation of an entirely new industry," the world's number one automaker said in a statement.

"To underscore this belief, it is making an initial investment of $1 billion over the next five years," it said.

Toyota Research Institute Inc., will be headquartered in Silicon Valley near Stanford University, and a second facility will be located near the Massachusetts Institute of Technology (MIT), with operation starting in January next year, it said.

The announcement comes as automakers have been vying to develop autonomous driving technologies that rely heavily on advances in artificial intelligence.

Google has been testing self-driving cars in Silicon Valley, as have US-based Tesla and General Motors.

Ford, Mercedes-Benz, Volkswagen and Nissan have also set up engineering centres near Google's headquarters in Silicon Valley to focus on autonomous driving technologies.

Toyota reaffirmed it will separately invest $50 million over the next five years with MIT and Stanford "to establish joint fundamental artificial intelligence research centres at each university".

Headed by Gill Pratt, former programme manager in the Defense Science Office at the US Defense Advanced Research Projects Agency, TRI will focus on technologies "using artificial intelligence and big data," the automaker said.