Intel has established a new strategic direction under CEO Lip-Bu Tan that fundamentally changes how the company evaluates and approves new product development. This shift comes as the semiconductor giant works to restore profitability while simultaneously advancing its foundry capabilities and preparing next-generation processors like Panther Lake.
Strict Profitability Standards Now Required
Intel Products CEO Michelle Johnston Holthaus announced at Bank of America's global technology conference that the company will no longer approve any new projects that cannot demonstrate at least 50% gross margin potential. This represents a significant departure from Intel's previous approach, where projects could proceed with lower margin expectations. The new policy means that engineering resources will only be allocated to products that meet this profitability threshold, effectively creating a financial firewall around Intel's development efforts.
Upcoming Intel Products Meeting 50% Margin Requirement
- Panther Lake processors (18A process)
- Nova Lake processors (future roadmap)
- All future roadmap operations expected to meet 50% gross profit target
Current Margin Performance Drives Policy Change
The urgency behind this decision becomes clear when examining Intel's recent financial performance. The company's trailing 12-month gross margin for Q1 2025 dropped to just 31.67%, a dramatic fall from the approximately 60% margins Intel maintained for the decade preceding the COVID-19 pandemic. This decline began in Q2 2022 when margins first fell below 50% and has continued steadily downward since then. CEO Tan is reportedly laser focused on returning gross margins above the 50% threshold and is actively investigating potentially unprofitable partnerships that may need restructuring or cancellation.
Intel Gross Margin Performance
- Q1 2025 trailing 12 months: 31.67%
- Pre-COVID decade average: ~60%
- Decline began: Q2 2022 (first drop below 50%)
- Target margin for new products: 50% minimum
Foundry Business Shows Technical Progress
Despite margin pressures, Intel's foundry division is demonstrating significant technical advancement. The company's 18A process node has moved into risk production, indicating readiness for mass production with volume shipments expected early next year. This milestone represents the completion of former CEO Pat Gelsinger's ambitious four nodes in five years strategy, positioning Intel to compete more effectively with industry leader TSMC. The 18A node will power Intel's upcoming Panther Lake processors, serving as both a product showcase and a demonstration of foundry capabilities to potential third-party customers.
Advanced Process Roadmap Unveiled
Intel has expanded its process technology roadmap beyond 18A with several new variants and future nodes. The 14A process is expected to deliver 15% to 20% better performance per watt compared to 18A, with potential power savings of 25% to 35%. A mobile-optimized 14A-E variant specifically targets applications where companies like Apple and Qualcomm might consider Intel as an alternative to TSMC's increasingly expensive services. Additionally, 18A-P scheduled for 2026 will offer an 8% performance-per-watt improvement while maintaining the same density as the base 18A node.
Intel Process Node Roadmap
- 18A: Risk production now, volume production early 2026
- 18A-P: 2026 availability, 8% performance-per-watt improvement over 18A
- 18A-PT: 2028 availability, includes 3D stacking capabilities
- 14A: 15-20% better performance per watt vs 18A, 25-35% power savings potential
- 14A-E: Mobile-optimized variant of 14A
Balancing Innovation with Financial Discipline
The intersection of Intel's margin requirements and innovation goals creates what Holthaus describes as an inevitable tug-of-war within the organization. Engineers and executives must now balance customer requirements and competitive positioning against strict cost structure demands. This challenge is compounded by Tan's commitment to transforming Intel back into an engineering-focused company while simultaneously implementing another major round of layoffs potentially affecting up to 20% of the remaining workforce in Q2. The apparent contradiction between empowering innovation and reducing resources reflects the difficult balancing act Intel faces as it attempts to restore both technical leadership and financial health in an increasingly competitive semiconductor market.