There's lots of reasons why cutting margins is a bad idea. Firstly, Intel are meant to maximize share holder value - and reduced margins have a dramatic bad effect on share price, because it's very easy to lose margin but very difficult to regain.
Even if they do gain market share by lowering margins, they also ensure that their high cost chips will canabalize their own lower performance chips. It also means that they'll canabalize future sales- if they sell you a 2 core 2GHz processor today, they can sell you a 4 core 2GHz processor in a year. Which is exactly what they've done with Apple, they're basically slowly releasing performance at a given price to ensure a certain refresh cycle. If they give you a 48 core 4GHz processor today they're not going to have anything else to sell you until 2050.
Thirdly, if they start competing on Price they have to work against their entire brand as being leaders in the market. You can't say "We produce the top performance chips" and also "Buy this because it's cheaper than the other options". Again, once you have the reputation as the low cost solution, it's very hard to regain the performance lead reputation.
Fourthly, a lot of the markets they're in aren't growing so they aren't going to increase total sales much by decreasing the margins, they're just going to make less money on what they do sell. So those lower margins don't really stimulate demand.
Finally, Intel has a very strong company brand, but a weak product line brand. Everyone knows Intel - so Intel has to define itself by it's name. It can't say "This is the performance product line", "This is the value product line" because all anyone sees is "This is the Intel product".
Call me cynical, but that doesn't look like a SMART goal, that looks like PR. Maybe I'm mis-remembering and his statements were internal rather than public, but in reality BK's real targets were about Market Cap and Revenue.
Even if they do gain market share by lowering margins, they also ensure that their high cost chips will canabalize their own lower performance chips. It also means that they'll canabalize future sales- if they sell you a 2 core 2GHz processor today, they can sell you a 4 core 2GHz processor in a year. Which is exactly what they've done with Apple, they're basically slowly releasing performance at a given price to ensure a certain refresh cycle. If they give you a 48 core 4GHz processor today they're not going to have anything else to sell you until 2050.
Thirdly, if they start competing on Price they have to work against their entire brand as being leaders in the market. You can't say "We produce the top performance chips" and also "Buy this because it's cheaper than the other options". Again, once you have the reputation as the low cost solution, it's very hard to regain the performance lead reputation.
Fourthly, a lot of the markets they're in aren't growing so they aren't going to increase total sales much by decreasing the margins, they're just going to make less money on what they do sell. So those lower margins don't really stimulate demand.
Finally, Intel has a very strong company brand, but a weak product line brand. Everyone knows Intel - so Intel has to define itself by it's name. It can't say "This is the performance product line", "This is the value product line" because all anyone sees is "This is the Intel product".