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To: Francis Chow who wrote (5239)	3/24/1998 2:39:00 PM
From: Maxwell	Read Replies (1) \| Respond to of 6843

Francis Chow: <<Now, is there any other business that AMD is in, which say has Asian exposure, and which could account for increased financial losses in spite of better CPU revenues?>> Increased in financial losses is due to increased in capital expending of FAB30 in Germany as well as increasing in equipment as AMD shift to the 0.25um. Drop in ASP of 0.35um K6 is also taking a toll. It takes money to make money. Maxwell

To: Francis Chow who wrote (5239)	3/24/1998 8:40:00 PM
From: Adrian Wu	Read Replies (1) \| Respond to of 6843

Francis, THe cost of goods sold is usually calculated at when the goods were made. In the case of inventory, the company can either use a First in-First out (FIFO) or Last in-first out (LIFO) principle. However, as we all know, K6 finished goods inventory is virtually non-existent as they are all on allocation, and fly out of the door as soon as they are made. It takes probably a month or more from raw wafer to a packaged microprocessor, especially with all that testing and the many mask steps that it takes to make a complicated chip like the K6. Since AMD only started producing 0.25 micron K6s at Fab25 recently in any significant volume, the cost of goods sold this quarter mostly reflects the cost of making the chips during last quarter and beginning of Q1, when the yield problem was still around. Once these lower-cost K6s and K6-3Ds are being sold at the end of this quarter, the earnings picture will improve. Adrian