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Technology Stocks : Intel Corporation (INTC)

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To: wanna_bmw who wrote (162280)	3/15/2002 5:38:16 PM
From: Saturn V	Read Replies (1) of 186894

Ref < Intel's US Loss and Overseas Profit > The geographic allocation of profit and loss for a multinational operation is almost an academic accounting exercise. If Intel ships a microprocessor wafer from a U.S. based Semiconductor Fab to Malaysia, where the wafer is diced, packaged and tested, and then shipped by Malaysia to customers all over the world, how do you allocate the profit to US and Malaysia ? If the wafer is "sold" at cost to Malaysia by the US operation, US pays for all the R & D and other overhead expenses, and makes a huge loss, and Malaysia makes a huge profit. So the critical issue is the transfer price of wafers between US and Malaysia. This transfer price can be quite arbitrary, and the multinational can set it to minimize its taxes by showing a high profit in the country where the tax rate is low, and show minimal profit in the country with a high tax rate. In reality transfer price is Wafer Cost plus an arbitrary profit allocation of 10-20%. The important issue to focus on is the overall profit of the company. The geographical location of the profit with multinational manufacturing is not very meaningful.

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