Intel (INTC) CEO Paul Otellini is giving the opening keynote at the Intel Developer Forum in San Francisco, the chip giant’s biggest event of the year. Intel controls 75 percent of the global semiconductor market, but is in a pitched battle with Advanced Micro Devices (AMD) for the future of chips that sit at the heart of PCs, phones, servers and more.

Companies such as Hewlett-Packard (HPQ), Dell (DELL) and Apple (AAPL) use these chips across their product lines, and they, along with the rest of the information technology industry, will be looking to Otellini for a roadmap to the future.

The keynote has begun.

Intel is showing a historical video about IDF, explaining how the conference was meant to give Intel’s partners and the IT industry a vision of the future. The company is showing video from every IDF since 1997, showing icon Gordon Moore and others rolling out products like Pentium and Pentium 4. Google co-founder Larry Page was on stage in 2000, before the company went huge.

In 2003, Centrino came out, and 90 nanometer processor, and then 45-nanometer. This is a bit of a geekfest, clearly tuned to get this crowd in the mindset of Intel innovation.

Pat Gelsinger, general manager of the digital enterprise group, is now on stage, talking about the importance of this 10-year anniversary of IDF. He calls it “the ultimate geekfest,” and says that the content will make it the best conference so far.

Paul Otellini is now due to come out onto the stage. A video is playing ahead of his entrance. Music, video and games are driving the demand for extreme chips, the narrator says,  and wireless (WiMax) and mobility are driving other chip design demands.

Otellini is now on stage.

The theme of his talk is extremes, he says. Extremes in product, technology and usage. He also wants to talk about how the industry must work together to drive adoption — “Extreme to Mainstream.”

He’s going to talk about Intel’s history of innovation, its current capabilities, and finally its roadmap.

He starts with a picture of a person wearing a Bluetooth headset, with a wireless laptop open, and a cell phone on the table. He’s making the point that a number of steps had to take place to make this image of work a reality. The microprocessor, then connectivity through Ethernet and eventually WiFi, memory innovation, and now power management.

“The innovations that we as an industry are making today are the basis of the future,” he says. Three things shape Intel’s vision for how it pursues the future: Its pursuit of Moore’s Law is at the top of that list.

Now he’s talking about how Intel builds chips, and the fact that in recent years, Intel engineers realized that its chips were built in an inefficient way that was letting too much heat leak out. (What he’s not saying is that Intel’s trouble with heat and managing power are a big part of the reason AMD made big gains with its Opteron processor four years ago.)

He’s touting that now, because of those innovations, Intel will be able to go to a 45 nanometer design, which basically means it will be able to pack transistors into a smaller space, either making smaller, more efficient chips or packing more features onto a single chip.

At the low-end of the market, Intel will use this technology to produce power-efficient chips; at the high end it will produce more powerful multi-core chips. He says he will announce a new concept code-named “Larrabee” a little later.

32-nanometer is next, he says. He’s now holding up one of the first 32-nanometer wafers. He says it will become a mass-production reality two years from today.

Now he’s talking about Intel’s platform philosophy — the idea that Intel takes microprocessors, chipsets and extra features like wireless and packages them together. (That’s what Intel did with Centrino most successfully.) This provides a big benefit to software developers, he says, making things simple.

Now he’s talking about Penryn, Intel’s next chip. Intel will launch it on November 12. It’s the first of 20 unique chips being developed on 45 nanometer. In Q1 08, Intel will bring out more related technology to address mobile and other segments. Intel is in production on this now, and wafers are now moving through the fab in anticipation of the November 12 launch.

Intel is designing a new generation of packages for its chips that will be 60 percent smaller. “Smaller is better, smaller is cheaper,” he says. Intel is already lead-free in its processes, and he says Intel will be Halogen-free by the end of 2008, which will be cleaner for the environment.

Next is Nehalem. This is 45 nanometers with a new microarchitecture. Intel will me able to more easily customize the chip to meet the needs of different customers and segments. Customers will be able to turn cores and caches on and off. At the largest configuration in 2008, there will be 8 cores on one die. Now he’s holding up one of the first Nehalem wafers. Each die has more than 731 million transistors on it.

Glenn Hinton, Nehalem Architecht, is now on stage. “Our team in Oregon has been working on Nehalem for a long time, and it’s great to see it finally here,” he says.

Hinton says Nehalem was designed to power scalable, multi-core systems, but also to deal with power efficiency. He’s getting very geeky right now about the chip’s capability, and he’s clearly a bit nervous. He talks about the ability for the chip to communicate quickly.

He walks Paul over to a computer that says, “Hello Paul; I am Nehalem. I am only three weeks old, and I am already talking.” He says that this computer is running XP, but that the team has already gotten it to boot Mac OS X.

Now Otellini will talk about platforms. There was Centrino for mobility, then Pro for businesses. Intel has shipped 5 million units in the year it’s been in the marketplace. (Interesting that he’s not mentioning ViiV, a “platform” play that’s widely seen to have been a marketing flop.)

Now he’s talking about new markets, and how important it is for Intel to drive scale. He’s showing a graph that suggests that its 45-nanometer chip will have the lowest defect density in a long time, meaning that the Intel factories won’t be churning out a lot of costly dud chips that don’t work. He’s also talking about how quickly Intel technologies become ubiquitous. (It’s a bit odd for Intel to boast about this. The company has 75 percent market share, and a lot of these machines last for only three years. So Intel has a huge advantage in forcing folks to upgrade.)

His point is that when Intel promises a new technology, you can count on the company to deliver it and make it a global phenomenon.

Now he’s going to talk about the future.

Starting with mobility: This is where the market is hottest today, he says. Prior to Centrino, laptops were 20 percent of the market (as a percentage of total clients.) Intel has shipped 120 million Centrinos, and in 2009 laptops will pass desktops as the most popular type of computer.

He says mobility is mainstream — he expects to be able to connect everywhere, but we still need new devices, services and products. He’s talking about WiMax as the wireless standard that Intel believes will enable the mobility vision of the future.

A year ago, he says, there were 10 WiMax trials happening. Now there are 120. Today Intel is announcing that it’s working with KDDI in Japan to make WiMax ubiquitous there. Intel is developing an integrated WiFi/WiMax product that will be available next year. Lenovo, Acer, Asus, Panasonic and Toshiba are committed to building this into their notebooks next year.

150 million people will be covered by WiMax next year, he says, and 1.3 billion in 2012.

Low power is essential to enable this WiMax transformation, Otellini says. Intel sais in 2005 that it needed to deliver a 10x increase in performance and a 10x decrease in power consumption in power consumption. Intel is today further committing that it will reduce “idle power” by 10x by 2010.

In mid-2008, Intel will launch Montevina. Integrated WiFi and WiMax, it will support HD DVD and Blu-ray, and it will be half the size. There will also be a 25-watt version available at launch. They’re getting ready for shipments next May. “There’s a demo of it today, in perhaps the ugliest notebook ever built,” he says.

Otellini now wants to talk about “extreme mobility,” or Internet-connected devices that we should be able to use to connect anywhere.

He’s now going live, via satellite to Utah, outside of Zion National Park. An Intel guy is going to do a base jump, live. “That’s awfully risky, Steve,” Otellini says. “Don’t worry, I’ll be fine,” Steve says. “I wasn’t worried about you, I was worried about the computer.”

They’re using Java-enabled devices to plan the jump, and they’re going to post video right after. (This demo is a bit odd. It’s clear that Intel set up special equipment to make this possible, so the relevance to real life is a reach at best.)

The joke’s on us — of course, he didn’t really jump more than about 5 feet. (The crowd laughs.)

Talking about entertainment: Consumer Internet is becoming increasingly focused on highly visual applications — games, virtual worlds, social networks, etc.

Games used to be a niche market — they’re becoming mainstream. There are more than 80 million online gamers on PCs, vs. 7 million on consoles. In Japan it’s even more extreme.

Charles Wirth, owner of XtremeSystems.org is on stage. He’s an overclocking expert. He breaks records in Super pi 1m, Aquamark 3, and Cinebench 10 32bit. He has pushed the quad-core processor to 5.56 gigahertz, he says. He’s mentioned that he’s running the chips at 160 below zero to achieve the overclocking. (You can’t exactly try that at home.)

Otellini says Intel’s integrated graphics will reach 65-nanometer in 2008, 45 in 2009, and 32-nanometer in 2009.

“This is good, but it’s not good enough,” Otellini says. Larrabee will be a solution for that. It will deliver teraflops of performace, he says, and it will scale easily for software developers. (This looks like a validation of AMD’s purchase of graphics chipmaker ATI.)

Jeff Yates, VP of product management at Havok, a software developer Intel bought earlier this month, is now on stage. Havok helps movies and game developers to take advantage of multi-core power in chips.

Josh Resnick, president and co-founder of Pandemic is on stage praising Intel’s purchase of Havok. Resnick says quad-core is really important for PC games development. He’s now shoeing a demo of Mercenaries 2, a game still in development.

The game has a lot of explosive action — stuff is getting blown up everywhere. (The character actually demolishes a high-rise building.)

Now Otellini is talking about consumer electronics. The changes coming all have to do with the support for the Internet in devices. Content also has to be portable, he says. Perhaps the most important change, though, is the role of software in consumer electronics, he says.  The ability to deliver fixes, updates and new features will be key. (Sounds like he’s talking about the iPhone.)

For this market, Intel is coming about with IA System on a Chip next year. Intel will demo it at the Consumer Electronics Show in January.

Andrew Fanara, who is on the EPA’s Energy Star team, joins Otellini on stage. He says 1.5 percent of national energy use is consumption by data centers, and the EPA expects that to double by 2011.  So he’s showing the Eco-Rack — it uses standard technology to make a rack of servers more efficient. By making some configuration changes that he says don’t sacrifice performance, the Eco-Rack can save 18 percent on power consumption.

The live coverage has ended.