If you sort the chunks while generating,

That presupposes that I'm generating the files.

You are searching for an algorithm that does better

I'm writing a utility to sort (much) larger-than-memory files of fixed-length records.

I already have a working version -- actually several, each an improvement on the previous -- but they are pretty slow. Infinitely faster than my system sort utility, but still significant room for improvement.

or claim to have found one?

It is not hard to beat your local system sort utility for this purpose.

To understand why, you really need to do as I suggested, generate a large, fixed-length record binary file, and try them for yourself.