They don't do this because they have zero real completion and can milk the high end market. Further, by holding back performance gains they can extend the upgrade cycle as long as possible.
PS: Cellphones are approaching Desktop chip performance.
Yeah, that's not how silicon manufacturing works. Tooling up for a new part of this size and ramping production gets into the tens to hundreds of millions of dollars. No one does niche-market (and yes, gaming desktops are niche) parts at the prices you expect.
Low-volume big parts cost a thousand dollars or more, that's no different at Intel than it is anywhere else.
Further, Intel already has a range of chips in production making that 100's of millions per chip vastly overblown. You can measure these numbers in several ways, but ramping up 100 million of chip X or 80 million of chip X and 20 million of chip version Y is nowhere near 200+ million.
It's just not cheap, being a 240mm2 die (almost twice what Kaby Lake is, with attendant yield penalties) targetted at a niche market with low volume.
So your point isn't that Intel isn't innovating, it's that you want them to do it in a way that violates straightforward economics and hand it to you for less than it takes to produce.
Basically: you got spoiled by the early days of the VLSI revolution. Silicon scaling isn't doing what you expect any more.