Dow Jones reports that the world's largest chip maker Intel (NASDAQ:INTC) is looking to form a joint venture (JV) with Japan's dominant cell-phone operator NTTDoCoMo (NYSE:DCM). DoCoMo, with 57% of Japan's cell-phone market, would co-develop cell-phone chip technology for a budding third-generation (3G) and the 2010 fourth-generation (4G) segment.

Intel will be entering a market with entrenched powerhouses. The cell-phone chip market is dominated by Texas Instruments (NYSE:TXN) and Motorola (NYSE:MOT). Last year TI sold two-thirds of the semiconductors used in cell phones.

Intel's technology, meanwhile, combines communications, applications, and flash memory onto a single chip, and is intended to drive down costs. Although Intel is focused on features, price is an important factor for DoCoMo.

KDDI, currently #2 overall in Japan, dominates the 3G market with 10.3 million subscribers -- 8 times as many as DoCoMo. In October, KDDI added 27% more subscribers than did DoCoMo. For the record, new subscribers is only part of what's troubling DoCoMo.

The company's latest quarterly earnings showed profits were down 7.8%. And over the last two years it has written off half of the $16 billion it invested in overseas phone companies.

So why is Intel even interested?

DoCoMo is an innovator -- and it is still cash rich. The company recently formed two joint ventures (JVs) with Sony (NYSE:SNE), the world's largest consumer electronics company, to focus on games and smart cards. The later would allow consumers to download electronic cash to their cell phones. By passing the phone in front of a special receiver, payments could be made for anything -- from subway tolls to concert tickets.

DoCoMo should also be able to convert, over time, a majority of its 2G customers to 3G services. Since DoCoMo has three times as many customers as KDDI, the future looks bright for DoCoMo -- so long as it offers competitive products. Intel can provide the chips with strong features, low prices, and top performance.

Intel, for its part, gets a partner that will push its technology into the marketplace. Like Sony, Intel wants to be number one and is willing to form a JV to get the traction it needs.

Still, it will be at least two years before the Intel/DoCoMo venture starts to produce product. The next interesting announcement should be the percentage of the JV Intel will end up owning. Sony, for context, owns 60% of its DoCoMo JV.

Bottom line: It is too soon to know if this will pay off for Intel. On the surface, it looks like Intel picked a well-positioned partner with cash to spend.

Is this DoCoMo business a cool name but a bad idea -- of vice versa? Talk it over on the Intel discussion boards. For a 30-day free trial to the discussion boards, click here . W.D. Crotty can be reached at .