It's not that they are cheap per se but Intel uses academia as a barrier to entry to get MS and PhD grads on H1B to do work that a BS grad could do. The thinking is that more education equals higher performance and more intellect for innovation. So basically, Intel abuses the H1B program to get what it thinks are better employees ostensibly because there aren't enough qualified employees in the US. As a former Intel employee I can say with certainty that these academically overqualified employees do not help with innovation and are no better at their jobs, often being the opposite due to risk aversion and other cultural differences. In reality, there are plenty of 4 year, and even 2 year, undergrads who could do much of the work Intel needs. And besides process development, contractors do all of the high skilled work anyhow.
Consider that many countries offer free higher education while the cost of getting an education in the US is very expensive. Many American students come out of school with a BS itching to get a job, particularly given their massive student loan debt. Well there's not many jobs at Intel where recruiters are looking to hire a new BS grad, even with an engineering degree, unless they come from a top engineering school. And of course they can afford to be picky when they can alternatively hire an Indian PhD for the same job and similar pay.
Intel will get away with this forever because policy makers are too ignorant and and probaly don't care to understand what skills are truly needed at tech companies. Companies like Intel can simply say "what we do is sooooo complicated that only PhD's can do it" and policy makers' eyes will instantly glass over and they will say "ok, keep up the good work".