[Insights] Lunar Lake Failure Exposes Intel’s Product Planning Problems

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Intel announced the termination of the Lunar Lake (LNL)’s packaging project, citing the dilution of gross margins due to DRAM integration. However, this actually reveals deeper issues: Intel’s significant crisis in product planning and organizational decision-making.

TrendForce’s latest analysis points out that this failure is not an isolated incident but rather a reflection of long-term structural problems within the company, highlighting the company’s multiple deficiencies in technology forecasting, product strategy, and market insight.

1.  Failure from Strategy to Execution

The Lunar Lake (LNL) project was conceived as a response to the increasing presence of Apple Silicon and Qualcomm in the PC market. However, Intel failed to accurately grasp the competitive landscape and market demands, resulting in an unclear positioning and misaligned direction for LNL.

While the decision to integrate DRAM aimed to enhance performance and reduce latency, downstream brands and OEMs thus lost flexibility in component selection, further diminishing the market appeal of the solution.

Additionally, Intel’s weak bargaining power in the DRAM supply chain, coupled with its reliance on TSMC for manufacturing, made the cost structure unsustainable, jeopardizing the commercial viability of this project.

Furthermore, Intel demonstrated a significant misunderstanding of the demand in the AI PC market. Microsoft set the threshold for AI PCs at 40 TOPS, while LNL’s NPU achieved 48 TOPS, becoming a marketing highlight for a short term.

However, this seemingly successful coincidence revealed Intel’s ignorance of market needs. The subsequent product, Arrow Lake, offered computing power of  only 36 TOPS, falling short of the threshold and unable to compete with LNL’s capabilities.

2. Lack of Market Sensitivity and Misjudgment of AI Application Adoption

The immaturity of the AI PC market partly explains the failure of LNL. However, the core issue lies in Intel’s poorly timed and inadequately executed gamble on this market.

With customer demand still underdeveloped and the product struggling to integrate with existing supply chains, launching such a high-cost solution at this stage was bound to face significant challenges and was unlikely to succeed.

In contrast, competitors such as AMD and Qualcomm concentrated on products with immediate commercial value, steadily expanding their market share.

3. Lagging Manufacturing Processes Leading to Operational Anxiety and Strategic Missteps

The failure of the Lunar Lake (LNL) project is not merely a technical or market issue but a manifestation of Intel’s dysfunctional decision-making processes.

First, Intel’s product planning lacked clear strategic direction, resulting in resource allocation and decision-making that were not grounded in a solid foundation. Second, the company often focuses on short-term technical breakthroughs but fails to align them with market demands and effective product execution.

Before 2019, Intel’s dominance in semiconductor manufacturing technology allowed the company to design chip products at its own pace. The LNL project used TSMC’s 3nm process. However, Intel still remained in disarray, creating a sharp contrast to AMD’s agile strategy.

Unlike Intel, AMD has adopted flexible product development and responded quickly to market demands, steadily eroding Intel’s market share in the server and high-performance computing sectors.

Lagging manufacturing processes have undoubtedly put Intel at a disadvantage in the hardware market. However, the root cause lies in its internal structural issues. Based on the lessons from the LNL project, Intel must urgently focus on improving the following three core capabilities.

Core Capabilities Intel Needs to Improve

Capabilities	Descriptions
Market demand forecasting and product positioning	Establish a more agile market research mechanism to ensure that product design is driven by future demand rather than merely showcasing technical capabilities.
Supply chain and cost management	Strengthen collaboration and negotiation power with suppliers to reduce the erosion of profits of highly integrated solutions.
Organizational culture and decision-making framework	Shift from technology-driven to market-driven product development, strengthen cross-department collaboration, and reduce resource waste.

Read more

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(Photo credit: Intel)