Could Intel Arc GPUs be in trouble? CEO of Products draws a line for what goes into production
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It has been a bit of a turbulent time for Intel. In the past year, it has had troubles with 14th and 13th Gen instability, and the next-gen 200S reviews were disappointing; it was no surprise to see their year end in stock crashes and cutbacks. Even with all that, the Intel Arc B580 reviews praised it for the value and performance it provided, but could it still be cut?
The graphics card department might be doing well in terms of audience scores, but is it enough for Michelle Johnston Holthaus, the CEO of Products? On June 3, Intel spoke at the Bank of America Global Technology Conference. There, they announced that if the product can’t achieve a gross margin of 50% or more, it will not receive engineers assigned to it.
Simply, it wants to match what the rest of the market is achieving as it tries to build back what it used to have. It believes in just focusing on the products that make it money, and that’s all. Hopefully, graphics cards are one of those, as they do undermine the market and provide a top budget graphics card option for those who need it.
Considering most of the models available are above MSRP and out of stock, we’d like to imagine the B580 and such are managing to do so. That’s if they were priced accordingly, as the price point is very competitive, but does that satisfy the needs of PC users or enthusiasts?
Below is the quote for Michelle on this matter, answering part of the question: “You mentioned the move towards 50% as kind of an intermediate type target. What needs to happen? Is it a product issue? Is it a pricing issue? What is the timeframe over which you think Intel can get to those kind of gross margins levels?”, and the follow-up of “More EDA.” from Jay Karya, an analyst for BofA.
“And moving forward if you have a product and you're going through like our decision matrix, you actually can't get approved if you're not a product that can show me that you can get above a 50% gross margin based on a set of industry expectations and ASP, which is something that we probably should have had before, but we have it now so that product doesn't move forward, you actually don't get engineers assigned to it if it's not 50% or higher gross margins moving forward.”
Michelle Johnston Holthaus, CEO of Intel Products talking to Bank of America
Intel’s next focus
For around a decade, Intel has been keeping its gross margins beyond or around 50% as reported by MacroTrends. Yet since 2020, that’s been falling, and more so in the past few years, as it now sits around 31%. So to alleviate the percentages, it has outlined some of its resolutions.
One of which is targeting data centers and AI, which it sees as key growth areas, and where it used to be a lot more prominent. It’s also enhancing its enterprise PC offerings and focusing on technologies such as its VPro lineup.
From its production, Intel is moving beyond its own foundries, as it aims to optimize product delivery. It will use both TSMC and Samsung alongside its own production facilities. The current split is 70/30 between internal and external usage.
So with improving balance sheet by reducing capital and operational expenditures, Intel is optimizing what it spends and hoping to get back with better products. Whether discrete Intel Arc graphics cards will survive remains to be seen, but considering their historically low market share versus the likes of AMD and Nvidia, it could spell the end for Arc, at least for discrete GPUs.
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