Intel requirement: New processors must achieve 50 percent gross margin
Intel is currently making a continuous loss. To get out of the hole, future products should become more profitable.
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Intel management only wants to release product ideas for further development that are likely to achieve a gross margin of at least 50 percent. This means that future processors and other chips must generate twice as much revenue as they cost to produce.
This is one of the measures with which CEO Lip-Bu Tan wants to make Intel profitable again. He took over the CEO position from Pat Gelsinger in March 2025. Intel's head of product divisions, Michelle Johnston Porthouse, spoke about the stricter development plans at the Bank of America Global Technology Conference. According to her, the focus on 50 percent gross margin comes from Lip-Bu Tan; he is highly concentrated ("laser focused"). Transcripts are provided by Investing.com and Seekingalpha.
Intel currently has a group-wide gross margin of 36.9 percent. This means that Intel makes around 1.61 US dollars in sales for every US dollar it costs to produce. That's not enough to be in the black – Intel is currently losing hundreds of millions to over a billion US dollars per quarter.
Before AMD's upswing with the Ryzen and Epyc processors, Intel usually recorded gross margins of more than 60 percent. This made the chip manufacturer attractive to investors at the time. Thanks to the expensive AI accelerators, Nvidia now has a gross margin of more than 70 percent. This corresponds to more than 3.50 US dollars in revenue per US dollar spent. AMD stands at around 50 percent.
No further development with an outlook below 50 percent
Porthouse explains: "If you have a product and you go through our decision matrix, you won't get approval unless you can show me that you can achieve a gross margin of over 50 percent based on a range of industry expectations and average prices. We probably should have done this before, but now we have. The product will not be developed and you will not be assigned engineers if the gross margin is not at least 50 percent in the future."
"I believe that our future products can all achieve this target. Ultimately, I think it comes down to being well-disciplined in the product lifecycle and developing products from the beginning that meet that target," Porthouse continues. "There's no reason why we can't do that, but we need to change some things internally."
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Less CPU stepping
In the case of processors, Intel wants to increase the validation effort so that even the early chip versions run more reliably. As a result, adjustments to the chip design should be necessary less frequently than before – so-called new steppings. They potentially delay the market launch and cost money because they require revised exposure masks.
In addition, Porthouse once again underlines the fact that Intel will only rarely come up with unusual chip designs. In the Lunar Lake mobile processor, for example, the memory directly on the CPU carrier does improve signal quality and efficiency. However, the manufacturer has already admitted that this design makes little economic sense.
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