But in fact, the most profitable part of this business is the low-mid market and we all know it. Almost no one (besides us hardware enthusiasts) would buy a high end gpu nowadays if you compare to all the low end gpus are sold (remember, intel is the manufacturer who lead the gpu market, you can find an intel integrated gpu in almost every low end notebook and low end motherboard)
Maybe us want proper gpus, but from all computer users in the world, we are a minority. Intel doesn't need to make powerful gpus, they would loose money investing money in that.
Intel is also lead in notebook platforms. If amd wants to compete with intel there, they can't go against intel with cpu performance because they will surely loose, so they have to strike in intel's weak point: 3d performance. If amd offers a capable low power cpu with a good integrated gpu, all with affordable price it would be better than only offering cpu muscle and low power consuption because intel would own that quite easily.