It is much easier for leadership to say GPUs are the problem than to admit they are having fundamental failures in their fabrication processes.
I think Intel has already admitted that fabrication is a huge issue. They're pretty open that they're second rate, much like AMD did when they spun off Global Foundries. Not everyone needs 3nm TSMC wafers and not everybody can even compete to buy them. Intel has moved its fabs to a separate business unit that I think will get sold off sooner or later.
I figured Intel would be exiting the DGPU market again after how badly Alchemist performed. They have to do some belt tightening anyway.
Alchemist wasn't great for gamers, but it was actually a win for OEMs and Integrators who were able to sell systems on the basis of having a dGPU at all for anything like a reasonable price when, if you're remember, five year old GTX 1060s were getting sold for $300.
The A7x0 cards are definitely a lot better now than they were at launch and Intel updates its drivers for Windows about twice a month. They are still taking the process seriously. Remember that they're going to be building these graphics cores regardless, because the underlying tech is important as a commitment to AI. Once the cores exist, scaling them to discrete hardware isn't that difficult.