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Intel Corp. has formed an unusual chip venture with two partners in China that could help address concerns about the security of imported technology.

The arrangement with Tsinghua University and Montage Technology Global Holdings Ltd., aided by more than $100 million in research funding from Intel, follows calls by Chinese officials to reduce the country's reliance on foreign-made semiconductors—particularly those used in systems that could be targeted by spies from abroad.

Intel said the university, known as TU, will develop a programmable chip that would be placed in a plastic module alongside one of its Xeon microprocessors, the most widely used calculating engine in corporate and government data centers. The additional chip—called a reconfigurable computing processor, or RCP—and associated software developed by the university would add capabilities that address "specific local requirements."

The company declined to discuss what those requirements may be. But Martin Reynolds, a Gartner Inc. analyst briefed on the ventures, said a likely possibility is that the RCP would help ensure that the Intel chip doesn't carry out suspicious activity.

"It lets you kind of prove the Xeon is behaving as it is supposed to be," Mr. Reynolds said.

Intel in 2014 announced a deal to invest $1.5 billion for a 20% stake in a holding company owned by Tsinghua Unigroup Ltd., which is owned by the university. That holding company owns two Chinese chip designers.

Montage, a subsidiary of one of China's largest state-owned tech companies, CEC, which makes electronics for the government and military, will commercialize the modules containing the two chips, starting in 2017.

"We believe this new collaboration is a win-win as it enables TU and Montage to innovate alongside standard Intel Xeon processors to create new and compelling indigenous products while preserving the respective intellectual-property ownership of all parties," said Raj Hazra, a vice president in Intel's data-center group, in a blog post.

The venture was announced in a ceremony in Beijing.

Intel has operated in China for three decades. The company has one chip-fabrication facility, which Intel said in October it would adapt to begin making memory chips at a cost of up to $5.5 billion.

The Santa Clara, Calif., company's latest announcement comes amid widening concerns about the health of the Chinese economy. Intel echoed such concerns in a forecast issued last week for the 2016 first quarter that caused a sharp drop in its stock price.

But most analysts believe any slowdown in China's technology purchase is most likely to affect personal computers. They don't see a slowdown in local purchases to expand the capacity of the country's data centers.

Indeed, the company's announcement follows a server-chip venture announced Sunday by Qualcomm Inc., a dominant maker of chips for mobile phones that is taking steps to diversify its business. That venture, which will be 55% owned by the province of Guizhou and 45% by Qualcomm, will rely on the technology licensed by ARM Holdings PLC that is a mainstay in smartphones. But Qualcomm officials said the venture may make chips with modifications for the local market.

Write to Don Clark at don.clark@wsj.com and Eva Dou at eva.dou@wsj.com

(END) Dow Jones Newswires

January 21, 2016 07:45 ET (12:45 GMT)

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