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Technology Stocks : Intel Corporation (INTC)

INTC 45.51

+10.7%

Jan 9 9:30 AM EST

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To: Mark Brophy who wrote (3414)	9/18/1996 1:25:00 PM
From: Paul Engel	of 186894

Mark - Re:"capital spending will be flat or down in 1997. ..." This could be - Intel has had a torrent of fab construction over the past 4 years. One positive note however - Intel's Newest Fab (#12) in Chandler, their third 0.35 micron facility, is producing Pentiums/Pentium Pros at yield and speed levels well beyond Intel's best estimates. This will impact their gross margins in a very positive manner in Q3 (slightly) and Q4 especially. Also, improved yield enhancement is tantamount to FREE CAPITAL EXPANSION - increasing yields at Intel's fabs produces more saleable die with existing plant, equipment, and personnel. This is one fantastic benefit from high volume manufacturing. Still on the plus side - if Intel can reduce their capital expansion in 1997, the money they save will be available for newer, more advanced fabs once their 0.25 micron and 0.18 micron processes are brought into production. From a cost standpoint - Intel is generating enough profit ($800 - $900 million per quarter) to fund THREE new fabs (MEGA FABS, in your parlance) EVERY YEAR. Quite a financial arsenal! Paul

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