By Stephen Nellis and Samrhitha A

(Reuters) -Chipmaker Intel said on Tuesday it plans to operate its programmable chip unit as a standalone business starting January next year, with plans to hold a public offering for stock in the business over the next two to three years.

Intel acquired the business when it bought Altera for $16.7 billion in 2015. Programmable chips sit between Intel's general purpose chips and chips that are designed for a single task and are used in everything from encrypting data to 5G wireless telecommunications equipment.

Intel said that Sandra Rivera, an Intel veteran, will oversee the new unit, which will continue to use Intel's factory to make its chips. Intel said it has started "an extensive internal and external search" to replace Rivera, who currently oversees the company's data center and artificial intelligence chip business that competes with Nvidia and Advanced Micro Devices.

(Reporting by Stephen Nellis in San Francisco and Samrhitha Arunasalam in Bengaluru; Editing by Shilpi Majumdar and David Gregorio)