And that's their endgame. No more (or significantly less) PCIe, no more dGPUs for anything but some pro customers, and iGPUs everywhere. It wouldn't matter to Intel that their iGPUs can't replace consumer cards in terms of raw power. All they have to do is wreck the dGPU market and everything falls into place.
One likely evolution in demand merits attention. Gamers appear to be the primary market segment that demands large numbers of PCI-e lanes on the desktop. However, as Intel IGD's improve, the demand for large numbers of PCI-e lanes gradually migrates exclusively to high end gamers who also value reasonably high ipc and a reasonable number of cores. Eventually, I expect Intel may reduce the number of PCI-e lanes on high end desktop SoC's and migrate high end gamers to the Xeon platform. Reducing the number of desktop PCI-e lanes makes it cheaper to produce desktop chips. Xeon will continue to offer strong performance and offer many PCI-e lanes. Xeon tends to be a higher profit margin product but high end gamers may still save from no IGD they do not need. The primary driver of demand for increased ipc is migrating to Xeon customers. Unlike gamers, server customers are always ready to pay for stronger ipc. Conceptually, it makes sense to satisfy both segments with Xeon.