Intel CEO Brian Krzanich Ethan Miller/ Getty Images Intel is reportedly working on an augmented reality headset, which would potentially put the chipmaker in direct competition with Microsoft's Hololens or high-profile startups like Magic Leap.

According to the Wall Street Journal, Intel is working on an augmented reality headset based on its 3D RealSense camera technology.

It's not clear how Intel plans to sell its new AR product. The report said Intel will likely sell the headset design to other manufacturers, much like the way it sells its chips to PC manufacturers. Given Intel's long-standing relationship with Microsoft, it wouldn't be surprising to see the two companies working together on this, either.

RealSense is Intel's latest "depth-sensing" technology that can do things like measure blood pressure and monitor people's gestures and movements. It's what makes Windows Hello, Microsoft's new facial-recognition software, possible.

Augmented reality overlays digital objects onto the real-world environment that a user sees. It's different from virtual reality which puts the user in a completely virtual space, blocked off from reality. Facebook, Google, Apple and Microsoft are all developing VR and AR products, betting that the technology could be the next big thing.

Intel has generated most of its revenue from selling PC chips, but with a shrinking PC market, it's been actively looking for its next growth-driver. Wearables has been one of the areas it's been heavily investing in, as it developed fitness trackers and smart earbuds. If the report is true, Intel's move into augmented reality could help accelerate its growth in the wearables space.