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A group of university researchers recently attracted attention by applying principles of open-source software to computer chips. Now they're turning the concept into a company.

A San Francisco-based startup called SiFive on Monday is announcing plans to develop and sell chips based on a technology called RISC-V. The tech includes a set of instructions that define the functions of a microprocessor, which can serve as a starting point for designing a chip.

RISC-V can be used without charge and freely modified, similar to the way open-source programs like Linux are now used by many companies. Its backers see it is an antidote to stiff development costs and other market forces that have deterred chip designers and contributed to the entrenched positions of players like Intel Corp. and ARM Holdings PLC.

"We are trying to reset that," said Krste Asanovic, a computer science professor who helped develop RISC-V at the University of California at Berkeley and serves as SiFive's chief architect. "We would like to have many more people try to build silicon."

Other engineers have used the RISC-V instructions to design chip prototypes—mostly at universities—while a nonprofit foundation formed to oversee RISC-V includes big-name members like Google Inc., Microsoft Corp., Oracle Corp., International Business Machines Corp. and Hewlett Packard Enterprise Co.

Those companies haven't said much about plans for RISC-V, which emerged several years ago. But SiFive, founded by Mr. Asanovic and two former UC Berkeley graduate students, is planning two product families. One will target applications for simple, low-price chips such as wearable devices and other equipment associated with the trend known as the Internet of Things. The other is aimed at more powerful data-center hardware, the company says.

Many potential customers are likely to want extensions and modifications of those chip designs to differentiate their products, SiFive's founders said. Indeed, the ability to modify and extend a chip's basic instructions is a key selling point for RISC-V's backers.

They cite restrictions in working with companies such as ARM, which licenses chip designs found in most smartphones and billions of other devices. The British company controls modifications to the basic instructions those chips can execute.

To try out a change, "you have to convince ARM to introduce that idea," said Jan Gray, a former Microsoft researcher and consultant who has been working with the new technology. "With RISC-V, you don't have to ask permission—you can just try out that new idea."

There are also financial advantages, said Yunsup Lee, another SiFive co-founder who helped develop RISC-V. ARM charges a licensing fee to use its technology as well as per-chip royalties on chips sold. This cost is in addition to others associated with design and manufacturing, so creating a new chip can cost tens to hundreds of millions of dollars, he said.

SiFive, which will face some of the same costs, isn't estimating how much it will charge customers. But it puts the development costs closer to projects on crowdfunding websites, most of which run well under $1 million.

An ARM spokesman declined to comment.

RISC-V isn't the first attempt at open-source chips. But backers say it has gained outsize momentum, inspiring programmers to write versions of Linux and other software to exploit it.

HP Enterprise, which created a RISC-V version of software used when computers boot up, believes the technology "could prove interesting" for applications such as the Internet of Things, a spokeswoman said.

Disk-drive giant Western Digital Corp., which is evaluating RISC-V for potential use in data-storage technology, thinks that in 10 years the technology could have as much impact as Linux had in software, a spokeswoman said.

"We find it intriguing," said Ronald Black, chief executive of Rambus Inc., which licenses chip technology and is experimenting with alternative schemes to do that. "If the industry is not going to grow, maybe we should think about different models."

Still, analysts say, building a large audience for RISC-V won't be easy. For one thing, rivals like ARM have built large communities of followers trained to use their technology—and their royalty and license rates haven't deterred many companies, said Jim McGregor, an analyst at Tirias Research. An ARM spokesman declined to comment.

How much of a cost advantage companies like SiFive end up offering could also be important. "Free sounds really good," said Linley Gwennap, an analyst at the Linley Group. "But if you go to SiFive, their business model isn't free."

Write to Don Clark at don.clark@wsj.com

(END) Dow Jones Newswires

July 11, 2016 09:35 ET (13:35 GMT)

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