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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: shane forbes who wrote (19458)	5/14/1998 1:30:00 PM
From: Katherine Derbyshire	Read Replies (1) \| Respond to of 70976

Very roughly 25% of the cost of a fab is non-equipment. However, you don't sit down and write one big check all at once. First you buy the land, then you hire the architects and the general contractor. Later on, as the building goes up, you start to sign POs for equipment, but you don't actually pay for the equipment until it's installed. Since in any given year, a company like INTC will have several fabs in various stages of construction, the % of any year's cap. ex. devoted to equipment will swing wildly. A smaller company, with only one fab under construction, will have even bigger swings in the ratio. Industry-wide, it probably does average out to a 75/25 split every year, so that's still a useful rule of thumb. If nothing else, equipment maker capacity probably keeps everyone from being in the same building stage at once. Except, just to keep life interesting, equipment costs may be growing faster than the other stuff, thereby changing the ratio. (Reasons are beyond the scope, but the two sectors have different drivers.) Katherine

To: shane forbes who wrote (19458)	5/14/1998 2:34:00 PM
From: David Aegis	Read Replies (1) \| Respond to of 70976

Intel recently revised its cap ex plans down for 1998 to $5.0 billion from a previously-announced level of $5.3 billion. Since the $5.3 include the DEC Alpha acquisition for $700 million, the adjusted figure (as revised) of $4.3 billion is less than last year's spending of $4.5 billion. But those figures include both plant and equipment, so it's still unclear whether Intel's equipment orders will be up or down this year. But since not much brick and mortar is being put in place, I would assume a higher than historical percentage is going to go to equipment. But the equipment companies I follow all say that Intel has cut back pretty dramatically... --David