Intel: New Products Must Deliver 50% Gross Profit To Get the Green Light (tomshardware.com) 44
Intel has implemented a strict new policy requiring all new projects to demonstrate at least a 50% gross margin to move forward. CEO Lip-Bu Tan explained Intel's new risk-averse policy as "something that we probably should have had before," later clarifying that the number is a figure the company is aspiring toward internally. Tom's Hardware reports: Tan is reportedly "laser focused on the fact that we need to get our gross margins back up above 50%." To accomplish this, Tan is also said to be investigating and potentially cancelling or changing unprofitable deals with other companies. Intel's margins have slipped to new lows for the company in recent months. MacroTrends reports Intel's trailing 12 months gross margin for Q1 2025 was as low as 31.67%. Intel's gross margins had hovered around the 60% mark for the ten years leading up to the COVID-19 pandemic, falling beneath 50% in Q2 2022 and continuing to steadily fall ever since.
Holthaus predicts a "tug-of-war" to ensue within Intel in the coming months as engineers and executives reckon with being forced between a rock and a hard place. "We need to be building products that... fit the right competitive landscape and requirements of our customers, but also have the right cost structure in place. It really requires us to do both." [...] Tan is also quoted as wanting to turn Intel into an "engineering-focused company" again under his leadership. To reach this, Tan has committed to investing in recruiting and retaining top talent; "I believe Intel has lost some of this talent over the years; I want to create a culture of innovation empowerment." Maintaining a culture of empowering innovation and top talent seems, on its face, at odds with layoffs and a lock on projects not projected to gross 50% margins, but Tan seemingly has Intel investors on his side in these pursuits.
Holthaus predicts a "tug-of-war" to ensue within Intel in the coming months as engineers and executives reckon with being forced between a rock and a hard place. "We need to be building products that... fit the right competitive landscape and requirements of our customers, but also have the right cost structure in place. It really requires us to do both." [...] Tan is also quoted as wanting to turn Intel into an "engineering-focused company" again under his leadership. To reach this, Tan has committed to investing in recruiting and retaining top talent; "I believe Intel has lost some of this talent over the years; I want to create a culture of innovation empowerment." Maintaining a culture of empowering innovation and top talent seems, on its face, at odds with layoffs and a lock on projects not projected to gross 50% margins, but Tan seemingly has Intel investors on his side in these pursuits.
Lol (Score:5, Interesting)
There goes their marketshare. The only reason why they stayed in the datacenter market at all was low margins/discounted product. They cut a lot of deals to get people to buy Sapphire Rapids. That memory has not faded. DC customers are going to demand more discounts if they're expected to buy delayed products. Given Intel's current track record, they'll probably miss their ideal ship date for Diamond Rapids.
Re:Lol (Score:4, Insightful)
If I'm just buying a CPU from them that's a fairly low risk bet. Very mature compiler target; more or less a known quantity once benchmarks are available barring the discovery of some issue serious enough to be RMA material. Even if they decide to quit on that specific flavor of CPU the ones I have and the remaining stock should continue to just work until nobody really cares anymore.
If it's something that requires a lot more ongoing investment, though, like targeting Intel for GPU compute or one of the fancy NICs with a lot of vendor specific offload onboard, I'm going to have bad day if my effort is only applicable for one generation because there's no follow-up product; and a really bad day if something goes from 'a little rough but being rapidly polished' to 'life support'.
Even back when they made money Intel never had a great track record for some of that stuff; they've always got something goofy going on the client side that they lose interest in relatively quickly; like that time when optane cache was totally going to be awesome; or the more recent abandonment of 'deep link technology' that was supposed to do some sort of better cooperation between integrated and discrete GPUs; but that stuff is more on the fluff side so it hasn't really mattered.
Re: Lol (Score:2)
I need a new lower end GPU for a spare computer and I've been seriously considering Intel until now. There's no way they'll keep making dGPUs now.
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So Intel had a history of selling moderate performance chips for moderate prices. It also introduced them after the premium chips but before the cheap ones arrived. But 64-Bit is the ceiling, since general purpose 128-Bit chips lose performance due to cache misses. There's nowhere to go but memory, low power, cheap, and/or specialty. And the other manufacturers know this. So What makes the CEO think there's some Intel "Special Sauce" to tap into?
Low tech basic chips in the US (Score:2)
There goes their marketshare.
There goes the idea of manufacturing some low tech basic chips in the US for a more robust supply chain. Second sourcing and all the classical engineering stuff. Hopefully some other companies can help with that. Something to consider should Intel ever desire a gov't "bailout" like General Motors.
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Intel does have some low-cost processes like 22FFL, but overall, yes, CHIPS was always a scam given that the driving impetus behind it was a shortage of automotive chips during COVID. Which is something you wouldn't necessarily make at Intel. Certainly not with any of their expensive recent nodes.
two paths diverge... (Score:1)
a) create products so good they can command such high margins
b) seek out markets without competition so you can rip off customers who have no other choice
gee I wonder which road intel goes down
Re: two paths diverge... (Score:1)
Re:two paths diverge... (Score:5, Insightful)
a) create products so good they can command such high margins b) seek out markets without competition so you can rip off customers who have no other choice
gee I wonder which road intel goes down
You forgot one:
c) Charge so much that the brand looks premium to those not paying attention, and somehow the public buys it.
Don't believe it happens? Gibson. Harley Davidson. Marshall Amplification. Several car brands. More gadget companies than I can count. Charge a premium for an average or slightly above average product and sometimes the masses will clamor for it. Does Intel have a good enough reputation to pull that gambit off? Right now, that's a coin toss.
Re: (Score:2, Interesting)
I don't think anyone thinks Harleys are technically superior. They are intentionally buying style, not performance. Though frankly, they do not need performance, and this is not restricted to H-D. I just saw an ad locally for a Hayabusa for $5k that was previously owned by an old guy who used it for touring, and "only" laid it down once at low speed. What a dipstick, he would have been better off with a convertible dodge shadow, but then nobody would be praising his vehicle choices.
H-D buyers are also buyin
Re: two paths diverge... (Score:2)
I'd take safe and reliable over performance, but HD doesn't offer that as an option either.
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Harley Davidson.
That's not fair. HD makes really good clothes.
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Harley Davidson.
That's not fair. HD makes really good clothes.
And truck-window decals.
And that's how you become Boeing (Score:2)
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You've gotta talk financial talk to the investors, but note that this is "gross profit margins", Which is just based on manufacturing costs; doesn't include R&D, marketing or sales costs.
idk what exactly that's going to mean for them. Maybe just focusing on chips (CPUs, GPUs, AI etc) rather than devices ? (video cards , wifi cards) ?
also that hedging even in TFA that "it's more of an internal goal" ... could be just meaningless corporate speak in the end.
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Seriously - their best stuff is in NIC's, embedded (n100 etc), wifi, chipsets, etc.
Sounds like they're gonna 86 all that.
Meanwhile Chinese foundries will be delighted with RISC-V parts at 19% gross.
Somebody told me they hired an engineer to run the place - guess not.
Bye bye graphics market. (Score:3, Interesting)
Arc, we hardly knew ye.
I looked at an Arc card in December, but thought "Nah, Intel is going to pull the plug again."
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At that point especially today you're going to buy a 9060 XT 16 gig or a 5060 16 gig. The latter is basically useless on a pcie 3.0 board thanks to the crippled 8X PCI Lanes but it looks like the 9060 XT is readily available for around $400. The b580 just cannot compete.
I heard that there was supposed to be more supply coming but the only justifica
My freind Kay works for Intel (Score:1)
She says the new MART-series processors expect just a 25% gross margin. The scuttlebut says they are needed for something special so they got blue-lighted.
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Yeah but this will work for a few years, long enough for a good run as CEO or to get a better sale price when they sell out to broadcom or whatever.
Re: My freind Kay works for Intel (Score:2)
I read this post in the voice of philomena cunk as a "My mate Paul..." quote all the way to the end before I realized you did not intend it that way
I guess I was too subtle Re:My freind Kay (Score:1)
Either that, or people old enough to remember the K-Mart Blue Light Special - or even K-Mart itself - are taking the day off of Slashdot.
Intel's Formula for Success (Score:4, Funny)
2. Make them as efficiently as possibly to reduce costs.
3. Sell them at competitive products.
4. Demonstrate their value to the consumer.
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1. Make competitive products.
Hasn't happened for multiple product generations now
2. Make them as efficiently as possibly to reduce costs.
Hasn't happened for multiple process technologies now
3. Sell them at competitive products.
Has not happened since Athlon
4. Demonstrate their value to the consumer.
See 3
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5. Repeat the cycle
6. Company has no innovations in the pipeline from prior penny pinching
7. Company goes after budget market
8. Bottom of market is flooded with all kinds of open source IP cores coming out of a shitty chinese fab.
I don't really think this is setting intel up to be an industry leader for much longer.
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Only funny on the topic? The low-hanging joke I was looking for was some sort of reverse spin on short-term focus on "profits" as defined by idiots with MBAs...
But I get why you were modded funny. Not how it works these days. If your profits aren't sufficiently obscene, then simply making a few honest bucks will lead to your corporate demise. Funniest when a vulture capitalist (with an MBA) borrows money against your own assets to acquire your company to cannibalize the most profitable bits. Actually it's a
Bloat (Score:1)
Your company succeeds, you hire a bunch of people, they hire a bunch of people, and soon you spend most of your time "doing company stuff" and very little doing what made you great. You do not notice for awhile, but then your competition finally get good. The only way out of the spin is to fire everyone but the highly useful and make competitive products. The market has changed and Intel got fat and lazy cranking up marginal improvements in desktop chips but now people want less medium iron and more light c
Desperation (Score:5, Insightful)
That kind of move is not an indication of a company that is determined to get back on its feet. It's short-term gain at the expense of long term success. That's what you do when you're desperate and believe you have lost.
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Indeed. This sounds like the current CEO wants to pad his personal wallet, but does not think he can do anything long-term.
Ahahahahahah! Talk about delulu.... (Score:2)
In order to get that gross profit, you have to have good products or stupid customers. Intel never really had the former, and the latter is getting scarce.
50% profit margin? (Score:2)
So, zero new products.
Next from Intel (Score:2)
No new products!
Sheesh (Score:2)
Ew (Score:2)
I want to create a culture of innovation empowerment.
That's desperate, corporate BS speak. So sad. What happened to you, Intel?
Late-stage crapitalism (Score:2)
death sentence (Score:2)
Profitability from day one is a death sentence for any project. Bye-bye Intel.
Even Apple doesn't have 50% profit margin (Score:2)
I don't know what this CEO is smoking, but you're LUCKY to get 30% profit margins when selling hardware. Expecting 50%+ is what you get when you're committing fraud.