At the Bank of America Global Technology Conference, Intel Products CEO Michelle Johnston Holthaus announced a strict new policy: Intel will only approve projects that can demonstrate the potential to generate at least 50% gross profit (the difference between revenue from the sale of goods or services and the cost of those goods or services). Holthouse noted that any product offering that does not meet this figure will not move forward and engineering resources will not be allocated to it, Tom's Hardware reports.
"Given a number of industry expectations, if it’s not clear that we can achieve 50% or higher gross margin, that product just doesn’t move forward," Holthaus said. She explained that Intel doesn’t necessarily require 50% gross margin on all operations, but that number is an internal standard for upcoming products like Panther Lake and Nova Lake, which are already projected to achieve that level.
The new decision is in line with Intel CEO Lip-Bu Tan’s efforts to boost profits after the company’s profitability plummeted. According to MacroTrends, Intel’s trailing 12-month gross margin fell to 31.7% in the first quarter of 2025, down from about 60% over the previous decade before the COVID-19 pandemic. Gross margin fell below 50% in the second quarter of 2022 and has been declining since.
Tan is also considering reviewing existing partnership agreements, seeking to modify or terminate those contracts that are not contributing to the 50% target margin.
Holthouse acknowledged that implementing the rule would create a tension between cost constraints and competitive demands. "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," she explained, anticipating an internal tug-of-war among engineers and executives accustomed to working to previous standards.
Under Tan's leadership, Intel has already carried out a significant restructuring: middle management has been reduced, and a large wave of layoffs is planned - up to 20% of the staff in the second quarter of 2025. Despite this, Tan emphasizes the return of a culture of "engineering solutions" and promises to invest in attracting and retaining the best specialists to support innovation.
Investors seem to be supportive of these changes. By focusing only on products with a clear path to 50% gross profit, Intel aims to restore profitability while strengthening its focus on high-end engineering.