After mostly missing the last technology wave — mobile computing — Intel Corp. today charged full-bore into what it views as the next big tech markets: virtual reality and the Internet of Things.

In a marquee announcement, the chipmaker announced a self-contained virtual-reality headset called Project Alloy to kick off its Intel Developer Forum in San Francisco, its annual three-day conference for software and hardware developers and other partners. In addition, Intel said it’s working with Microsoft Corp. to make holographic interfaces using Intel technologies available on Windows 10 personal computers next year.

Intel Chief Executive Brian Krzanich (pictured above), pitched Intel’s version of VR that is intended to blend the virtual world and the real world, or more specifically VR and AR, or augmented reality. “We’re driving toward a “merged reality,” he said as he announced that Intel is building a new production studio in Los Angeles using the technology. “We believe it’s a game changer for virtual reality.”

In particular, Project Alloy, which is intended as a prototype that other companies would manufacture, will allow for headsets that allow for six degrees of mobility. That means much more freedom to move around in virtual spaces with a better awareness of the real world without external sensors for guidance — which would avoid, for instance, as one Intel staffer demonstrating it onstage put it, “injuring the CEO of a Fortune 500 company.”

Alloy headsets also will use cameras with Intel’s RealSense motion and depth sensing technology to allow for more accurate position tracking. In addition, Alloy will enable more natural manipulation of objects in virtual environments using only one’s hands rather than separate controllers. Intel demonstrated how the headset will show one’s hands as well as the image of another real person in the room, though both examples looked like works in progress (photo below).

Not least, the headset won’t have to be tethered to a PC like Facebook’s admittedly more powerful Oculus Rift. Intel plans to make the technology freely available via open source next year.

Krzanich, whose company is under pressure to find new growth markets as sales of PCs using its iconic microprocessors have declined, also signaled a broader foray into the Internet of Things. He unveiled Joule, a high-end computing platform on a small circuit board that Intel says will deliver “human-like senses” to any number of smart devices. Joule enables developers to create and run a new generation of IoT devices, ranging from a robot that can converse with people to a smart motorcycle helmet with head-up Global Positioning Satellite (GPS) capability to industrial sensor devices from General Electric.

GE Chief Executive Jeffrey R. Immelt took the stage to announce his company is working with Intel on a number of fronts, including a “smart” light pole that can collect data on pedestrian movements to manage traffic flows or data on changes in parking spaces. “Industrial productivity has declined of late,” he said. “Old IT tools are not really doing it later. We need to do better.”

Intel also announced Project Aero, a platform for developing drones that can use RealSense cameras. And Elmar Frickenstein, senior vice president and head of BMW’s Autonomous Driving Program, was driven onto the stage by an autonomous car to demonstrate the need for what he said was an in-car “supercomputer” powered by high-end Intel-powered chips.

Finally, Krzanich trotted out the 2014 winners of its America’s Greatest Makers show to demonstrate a smart toothbrush called Grush that will be out later this year. A boy brushed with it while a game-like screen (shown below) showed which teeth were getting brushed as a way to ensure proper technique.

Screen showing real-time brushing using Grush smart toothbrush.

“Together we’re going to introduce some of the greatest changes in technology in a long time,” Krzanich, who has been Intel’s CEO since mid-2013, told the audience of some 6,000 developers.

Intel’s continuing focus on VR and the Internet of Things, which has been underway for at least a couple of years, reflects the multi-pronged push by Intel to make its chips more relevant in a fast-changing market for computers and other devices. VR systems and autonomous cars both demand powerful processors, Intel’s traditional strength. At the same time, Internet of Things applications such as wearables, robots and industrial sensors require not only untold numbers of chips that only a few chipmakers have the capacity to build, but also access to cloud computing powered by massive data centers also powered chiefly today by Intel processors.

Despite the keynote’s focus on flashy new technologies, Krzanich notably spent more time than he has in recent year’s events on how the PC, and in particular Intel processors, remain at the center of the future of technology. “A powerful microprocessor remains an essential component of innovation,” he said while previewing the seventh-generation four-processor-core chips that will be out in PCs late this year.

“PCs are still the biggest revenue and profit driver for Intel,” said Patrick Moorhead, president of Moor Insights & Strategy. “The keynote was an authentic representation of what Intel is and where it wants to be.”

Nonetheless, many of the newer technologies will take years to go mainstream. In the meantime, Intel must contend with declining PC sales — 5 percent in the second quarter, according to Gartner Inc. Although that’s a slower decline than in recent quarters, Intel’s recently reported second-quarter sales rose only 3 percent from a year ago, to $13.5 billion, causing its shares to swoon. And that came three months after Intel announced plans to cut 12,000 employees, or 11 percent of its staff.

Lately, Intel has been focusing more on selling processors for servers in data centers and private and to public cloud computing providers, as well as chips for mobile devices and sensor networks for the developing Internet of Things market. But the growth of those markets also fell short of expectations in the most recent quarter.

Intel largely missed the boat on chips for mobile devices to those made using ARM Holdings  technology as well as chips from Qualcomm. In fact, today Intel essentially conceded as much by announcing a deal with ARM to allow its customers to make ARM chips using a new production process in Intel factories next year.

Intel CEO Brian Krzanich helps demonstrate the Project Alloy VR headset, showing the wearer’s own hands on the screen at right.

Last week, Intel also sought to shore up its chips aimed at machine learning, a fast-growing branch of artificial intelligence that’s driving advances in speech and image recognition, with the acquisition of Nervana Systems Inc. Not least, Intel has bet on a new memory chip, due out later this year in partnership with Micron Technology Inc., that is much denser and faster than current technology allows.

Making any of those bets pay off will be challenging — especially with another fundamental shift looming. Moore’s Law, an observation by Intel cofounder Gordon Moore that the speed of chips doubles every couple of years for the same price, is getting forcibly changed by Intel and others. Intel has signaled that it’s slowing the pace of performance gains in favor of chips that don’t use as much power–a quality key for both small devices like smartphones and other mobile devices but also for data centers crammed with hundreds or thousands of power-hungry servers.

Krzanich spent little time on its data center and cloud initiatives, apparently leaving that to Wednesday’s morning keynote featuring Diane Bryant, Intel’s executive vice president and general manager of its data center group. But he did speak to the necessity of powerful back-end data centers and cloud computing to handle rapidly escalating amounts of data. By 2020, he said, the 1.5 gigabytes a day that average Internet users will create will be dwarfed by the 4,000 GB a day that each autonomous vehicle creates or the 1 million GB smart factories will deal with.

All that data, he said, will require a coordinated system from edge devices to cloud computing to bring under control and use. Jean Bozman, principal analyst at Hurwitz & Associates, said it was important that Intel acknowledged the importance of this “end to end” system.

Photos by Robert Hof