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companies like Apple and AMD have useful gpus in their SoCs, something that Intel is still catching up on. On desktop it's not that big of a deal but for portables it is a good way to save on power+cost while still delivering adequate performance.
Also they're going to be paying to develop these GPU IP blocks anyway, may as well use the IP as much as possible against the competition. Amortize that R&D cost. Arrow Lake will have the GPU segregated from the CPU chiplet also so it's less likely there will be defects even if they up the GPU size, whereas something like the 13700k is already pretty big on its own even with the small igpu so it would be relatively expensive to slap a good iGPU on there.