By Eva Dou in Beijing and Don Clark in San Francisco 

As China tries to forestall foreign governments from tapping its phones, it has turned to a man named Leo Li.

The chief executive of Chinese chip maker Spreadtrum Communications Inc. said China's central government asked his company last year to begin making special-order "safe phone" processors for some officials' smartphones, replacing in one to two years widely used chips from U.S. suppliers that Beijing fears could have built-in "back doors" to aid foreign spies.

"The security of handsets is very much on the minds of Chinese officials, " said Mr. Li in an interview this month.

China's Ministry of Industry and Information Technology didn't respond to a request for comment.

Cybersecurity concerns are helping to shape a new wave of technological development in China, adding another impetus to a well-financed government campaign to reduce the country's dependence on foreign components. Semiconductors have emerged as a focus, both because of their economic importance and in controlling key functions of smartphones, televisions, computers, networking equipment and other products.

Most recent disclosures about intelligence-gathering have focused on software vulnerabilities rather than computer chips, which are much more difficult to modify. But Chinese officials are nonetheless trying to reduce the risks, following revelations about U.S. surveillance activities by former National Security Agency contractor Edward Snowden.

China Vice Premier Ma Kai declared semiconductors a key sector in September 2013, three months after Mr. Snowden alleged U.S. authorities hacked millions of Chinese phone messages. These hacks, however, had nothing to do with chips, and it is unclear if chips have ever been used for spying purposes.

The push dovetails with China's growing aspirations to move beyond the factory floor and foster homegrown innovation. Though the country has become a dominant maker of smartphones and other products, the vast majority of chips inside them come from foreign suppliers including Qualcomm Inc.

Chinese chip designers and manufacturers are years away from fulfilling the country's needs, analysts and industry executives say. But the government's uneasiness about foreign chip makers--and the push to create competition for them--adds to pressures facing U.S. companies trying to do business in the country.

A Chinese agency is investigating Qualcomm, which supplies the vast majority of advanced wireless chips for smartphones as well as many processor chips, under the country's antimonopoly law. The government is expected to accuse the company of abusing its market dominance over smartphone patents.

The country has tried to spur semiconductor development in the past, but remains far behind foreign competitors in both design and manufacturing technology. This time, though, the government's funding is more generous and its tactics more sophisticated, analysts say. Since the fall of 2013, China has announced plans to funnel more than 160 billion yuan ($25.6 billion) into a variety of chip-related initiatives, with further investment expected.

"The growth goals are ambitious, but are very real," said Handel Jones, chief executive of the Silicon Valley consultancy International Business Strategies, who has written two books about technology in China and spoke recently with government officials there.

Some progress has been made already. China's semiconductor imports fell 5.9% last year compared with a 20.5% rise in 2013, according to Chinese customs data. The country still gets more than 90% of semiconductors from abroad, Mr. Jones of IBS estimates, but the percentage of homegrown chips--which stood at 4.5% in 2010--reached 8.6% in 2014.

For Spreadtrum, the government assistance has made a difference, says Mr. Li. The Nasdaq-listed company was acquired at the end of 2013 by a Chinese state-owned firm, Tsinghua Unigroup. Since then, government grants have helped Spreadtrum increase its staff by a third last year to 4,000, with plans to hire an additional 1,500 this year, he said.

The company has also been able to accelerate its chip development. Though Spreadtrum still lags years behind leading U.S. firms, Mr. Li says his company will be able this year to match a key selling point of companies like Qualcomm: the ability to handle speedy long-term evolution--or LTE--cellular connections on a new multifunction "system-on-a-chip."

Previously, only one Chinese chip firm had LTE capability, a Huawei Technologies Co. subsidiary named Hisilicon that makes chips almost exclusively for Huawei-branded devices.

Foreign giants in the roughly $350 billion global semiconductor business seem to have little to fear soon from Chinese competition. Chinese chip design companies only held 8% of the global market in 2014, according to research firm IC Insights, and this was mainly low-end chips.

Samsung Electronics Co., SK Hynix Inc. and Intel Corp. have chip factories in China, and they are stepping up investments and joint ventures aimed at penetrating the Chinese market. This could also improve local expertise in semiconductor manufacturing and design.

One of the most sanguine about Chinese competition is Intel, whose x86 chip designs are found in almost all personal computers and can't easily be copied by Chinese designers.

"The fact that they want to develop that capability, we don't feel threatened by that," Andy Bryant, Intel's chairman, said in a December interview with Wall Street Journal editors.

The Silicon Valley giant has lagged behind in mobile chip market share though, and has looked to China for growth. Last year, Intel bought a 20% stake in Spreadtrum's parent company Tsinghua Unigroup and announced a partnership with a smaller Chinese chip maker, Fuzhou Rockchip Electronics Co., to make tablet chips together.

Intel officials say the potential boost for sales in China outweigh any risks about sharing technology for the company, which has largely dodged the harsh government scrutiny faced by Qualcomm.

The U.S. government has long operated programs to make sure that chips used in military systems are produced in Pentagon-monitored domestic factories. It is also helping to fund research in ensuring that chips made in foreign factories for other kinds of devices haven't been improperly modified, though there is little evidence such tampering has occurred.

Qualcomm representatives declined to comment on security concerns of Chinese officials. But Henry Samueli, co-founder and chairman of rival Broadcom Corp., dismisses the issue as largely "hype." He said it is much easier to exploit vulnerabilities in software and other parts of high-tech products than tamper with chips.

Broadcom sells a broad range of communications chips used in networking devices and other systems built in China, and Mr. Samueli says he has noticed little hesitance to buy his company's products. "In the end, if you deliver the products that they want, they will use them," he says.

Still, Spreadtrum's Mr. Li hopes to benefit from the security concerns. He said the Chinese government hopes to have "safe phones" for officials in a couple of years that use vetted chips made by Spreadtrum, as well as a secure operating system and encryption technology designed in China.

It is unclear what company might manufacture these "safe phones."

A basic version will also be available for Chinese consumers, he said.

"Whether it's the government or regular consumers, they worry about their privacy," he said.

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

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