VarmintCong :
I didn't say profit, I said cost. They could make a video-free chip for half the cost, and sell it for say, $20 less, making even more profit than the current chip.
So why not do this? If they made a die half the size, and still charged $200 for it...
It could also be that because Intel has massive fab overcapacity, they don't save any money by making smaller chips.
No, not really. The would need to add a separate production line (assuming no excess capacity) which would be very expensive to setup. Initial costs would be over $1 billion for the investment in machinery, and the plant.
If Intel actually has a excess capacity, then it would take time and money for re-tooling. It would likely take several million dollars to retool the machinery. Additionally, to shrink the processor down due to the removal of the graphic core does take a bit of time and money as well. Lastly, you would need to hire people to operate / supervise the production process.
That would be all for a CPU which lacks a graphics core to appeal to a very small fraction of their customer base. OEMs would not want to buy it because they want to cut costs. The inclusion of a graphics core means they can build a PC or laptop without a discrete graphics card which will save them money. For gaming oriented rigs they would only have to install a graphics card and pass the cost (plus a profit margin) to the customer who is looking for a gaming rig.
OEMs represents the biggest client base for Intel. Hardware enthusiast represents the smallest client base. While the actual cost in material and time to manufacture a smaller CPU (i.e. no iGPU), that does not take into consideration the cost of adding a new production line and equipment or re-tooling existing equipment for the new CPU derivative. A small production run means those cost can only be spread out amongst fewer CPUs. That means the price of each CPU will be inflated because of the cost Intel would need to recover even if they wanted to just break even.
For simplicity sake, let's just say for the 1st year it costs $150 million (direct expenses) to re-tool the machines, redesign the CPU to remove the iGPU, and operate the production line. Let's say there are 3 million enthusiast (much smaller than OEMs) who are interested in buying this "iGPU-less" CPU. That means each CPU carries $50 of direct costs that Intel will include as part of the selling price for each CPU. This does not include indirect expenses (examples: administrative costs, warehousing, distribution / selling, etc.). Indirect costs are not insignificant and remember to tack on say a 25% - 35% profit margin for Intel. All this will add to the overall cost of the CPU.
Additionally, for a company the size of Intel, do you think they would bother with a 3 million unit production run per year?