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Intel blew it on mobile. Now it's trying to avoid missing out on virtual reality.

The chip giant hopes that VR, connected cars and other devices will play to its strengths.

Intel CEO Brian Krzanich, showing off the company’s Project Alloy virtual reality headset

There was a lot of talk about virtual reality as Intel kicked off its annual developer conference on Tuesday.

CEO Brian Krzanich spent a good deal of time showing off a homegrown prototype device, Project Alloy, that features position tracking and the ability to merge the real and virtual worlds, all in a self-contained headset that doesn’t need to be tethered to a separate PC. Intel plans to freely share that design and is also working with Microsoft to bring holographic capabilities to all Windows 10 PCs by next year.

Intel plans to make the designs for Project Alloy freely available to hardware makers.

Intel likes talking VR for a couple of reasons. First of all, virtual reality brings the tech world to Intel’s home turf, demanding all the processing power that its latest chips can provide.

Right now the chip battle remains up for grabs. Intel has a central role in PC-centric devices like Facebook’s Oculus Rift and Microsoft’s HoloLens, while mobile headsets such as Samsung’s Gear VR and Google’s Daydream make use of the smartphone and its non-Intel mobile chip.

There’s another reason Intel likes talking about VR.

Actual reality has been a little rough for the world’s largest chipmaker over the last few years. Once the center of the tech world, Intel has seen its place sidelined as the world has shifted from PCs to smartphones and the chip giant has failed to keep pace.

It has spent billions trying to get its chips into phones for little gain, with the mobile universe centered on chip designs from rival ARM. Sales, meanwhile, declined last year and the company announced plans to cut thousands of jobs.

Intel is still a huge company, of course. Last year it took in $55 billion in revenue and made a hefty $11.4 billion in net income.

If Intel is to return to growth, though, it needs to either shift into new areas or somehow bend the world back to its existing strengths. Intel is trying a little of both, spending a lot of money on tiny computing modules that could go in Internet of Things devices like robots, wearables and security systems.

But it is also hoping that things like autonomous cars, virtual reality and smart cities will demand processing power that ARM-based mobile chips can’t provide.

That’s where its annual developer conference comes in. In San Francisco, the company is pitching a record 6,000 developers on its vision of the tech future. Krzanich tapped GE chief Jeff Immelt as well as executives from BMW and Microsoft to bolster the argument.

Rivals like Qualcomm and Nvidia are making a strong case that mobile chips, rather than PC processors, make more sense to power the cars, drones and connected appliances of the future.

And despite record attendance, IDF has lost a fair amount of luster over the years as the PC has shifted from the center of the tech world to being just another device on the internet.

Once upon a time, the Intel Developer Forum was the place to go to find out where the tech industry was headed. As the maker of nearly all the world’s PC chips, Intel was uniquely aware of what the industry would be capable of in a couple years’ time.

So twice a year, reporters, analysts and techies headed to the California desert to see where the industry was going.

More than a decade ago Intel moved things away from Palm Springs and back to Silicon Valley. These days, IDF is held in downtown San Francisco, a reflection of how much energy has shifted into the mobile economy and away from PC giants like Intel, Microsoft and Hewlett-Packard.

If there was a big positive to take away from Tuesday’s opening, it was that at least the PC giants understand their predicament.

Analyst Patrick Moorhead said the fact that Intel and Microsoft appear to be on the same page is key. Microsoft and Intel talked up cooperation around virtual reality, including establishing a new set of guidelines so device makers can build a VR-ready system.

"Historically, more has been accomplished with the two working together than against each other. Intel and Microsoft were not aligned in smartphones or tablets, and the result was negative for both," he said.

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