On Tuesday, Intel kicked off its three-day Developer Forum in San Francisco. Virtual reality and its foundry business of manufacturing chips for other companies were among the main themes in the first day of the chipmaker's conference.
In fact, the Santa Clara, Calif.-based chipmaker launched VR headset Project Alloy and introduced a new concept it calls merged reality in which users switch back and forth between virtual reality, which offers a computer-generated environment that blocks out the real world, and augmented reality, which adds computer-generated images to the physical world.
Intel touts Project Alloy as an all-in-one VR headset that includes sensors, cameras, batteries and a central processing unit. (CPU refers to a type of chip that essentially handles the majority of a computer's calculations.)
On the VR software front, Intel will partner with Microsoft (MSFT) - Get Report with Windows Holographic, thesoftware that powers Microsoft's VR product HoloLens.On the hardware front, it will open-source the Project Alloy hardware to developers in the second half of the year.
"Virtual reality is obviously in its early stages," said Northland Securities analyst Tom Sepenzis via phone, adding that while it will take a couple years for the concept to fully develop, it bodes well that Intel is making a push toward VR, espeically as it looks to diversify outside of its core PC business.
"It's clearly an exciting area for everyone," he further said, adding that Intel's Project Alloy seems different in that it doesn't seem to require a high level of computing power as did early competitors such as HTC's Vive headsets.
Semis Nvidia (NVDA) - Get Report and Advanced Micro Devices (AMD) - Get Report are among the semis that have already started building VR-focused chips. On the other hand, Qualcomm (QCOM) - Get Report offloaded its AR business Vuforia to PTC (PTC) - Get Report last year.
Elsewhere, Intel also hinted at its focus on growing its foundry division, in which it allows other companies to use its chipmaking factories. Intel, for its part, announced new customers for its foundry business including LG, Spreadtrum Communications and Netronome.
Northland's Sepenzis explained that while the foundry business tends to be a lower-margin business, it also represents a positive step forward for Intel. Intel hasn't been able to expand its footprint in the mobile sector in a meaningful way, but now should be able to capture some presence in mobile by offering a foundry platform on which companies will be able to build mobile products.
LG has been a significant customer for Qualcomm, mostly for chips going into higher-end smartphones, noted RBC Capital Markets analyst Amit Daryanani in a Wednesday note. The foundry agreement between LG and Intel could serve as a negative read-through for Qualcomm as it decreases the probability that Qualcomm's Snapdragon processors will be the sole product in high-end LG smartphones moving forward.
Shares of Intel are up about 1.7% year-to-date. On Wednesday afternoon, its stock was down about 0.9% to $34.91.