Seems like a mistake to not use HBM. A first generation product is not going to achieve high volume in any event, so why launch something mediocre? Given Nvidia's market position and advantage in game optimization, an Intel solution has to have 50% more raw horsepower to be competitive. I'm not seeing that here.
HBM is terribly expensive. Even AMD learned its lessons and has backed off of pushing HBM2 in the consumer segment. It has its use cases, like enterprise / HPC stuff, or when you want to use as little area as possible (eg, Navi 12 for Apple MacBook), but the price/performance just isn't necessary or beneficial for consumer products.
As far as a raw horsepower advantage, I think you're stuck in the past. Iris Plus Gen11 graphics has about 1.1 TFLOPS of computational power. It performs basically like a 1.1 TFLOPS AMD or Nvidia GPU. By which I mean that it's woefully underpowered, only half the performance of a lowly GTX 1050. Intel really needs more ALUs / EUs for its graphics ambitions, and it looks like Xe HPG may do the trick. I don't expect a 10 TFLOPS Intel part to outperform a 10 TFLOPS Nvidia part, but a 15 TFLOPS Xe HPG could probably put up a good fight against RTX 2080 Ti.
We definitely need to see Xe HPG in action before coming to any conclusions, though. Even Xe LP won't really tell us what to expect from Xe HPG, since HPG is going to reworks the architecture for sure. Fundamentally, it's just a matter of getting optimized ALU cores that can run gaming workloads fast, and Intel has the R&D resources to try and make that happen. Whether it can succeed (and overcome internal politics) is a major question.