In a bold move to revitalize its financial performance, Intel has set a new mandate under the leadership of CEO Lip-Bu Tan: all new products must achieve at least a 50% profit margin. This sweeping change comes as part of the company's strategic efforts to regain its historically high margins after they plunged during the COVID-19 pandemic.

The Margin Mandate

Intel's challenge is significant. Not long ago, the semiconductor giant enjoyed gross margins hovering around 60%, but as of Q1 2025, they have fallen sharply to 36.9%. TrendForce recently reported on Intel's new directive, which demands that any initiative not capable of reaching a 50% margin should not proceed, aligning closely with the company’s intensified focus on hardware profitability.

Intel Products CEO Michelle Johnston Holthaus confirms this company-wide strategy, noting that it applies to flagship developments including Panther Lake and Nova Lake. By enforcing these strict guidelines, Intel aims to filter out less profitable ventures and concentrate resources on high-margin projects. Notably, the company isn't just letting go of underperforming projects; instead, it's restructuring and potentially cancelling deals that don't meet the profitability benchmark.

Workforce Overhaul

Aligned with this financial reshaping, Intel is also undergoing significant workforce reductions. Over 20% of the team is expected to be cut, which follows previous layoffs that reduced numbers from 124,800 employees in early 2023 to 108,900 by the end of 2024. As Bloomberg notes, these reductions are intended not only to manage costs but also to streamline operations and refocus on engineering prowess.

Strategic Customer Engagements

Despite these hurdles, Intel's innovations continue to attract industry giants. Reports from Tom's Hardware indicate that companies like NVIDIA and Microsoft are exploring Intel’s 18A process technology. Notably, Microsoft seems to have already secured a large-scale foundry deal, and Google is reportedly also in discussions.

Conclusion

Intel's focus on boosting its profitability through strategic initiatives, such as mandating high-margin projects and realigning its workforce, is a decisive step towards reclaiming its market position. Balancing these internal changes with the excitement of new customer engagements sets an intriguing backdrop for Intel's future. As the semiconductor landscape evolves, Intel's moves will undoubtedly be watched closely by market participants and competitors alike. Read more about this strategy in detail at TrendForce.