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To: Justa Werkenstiff who wrote (15290)	8/20/1998 1:04:00 PM
From: Andrew Vance	Respond to of 17305

AV--Most chip suppliers will not spend their budgets for the heck of it. They have factored in the capital budget into this years wafer costs and depreciation schedules. That means the CAB (Capital Appropriations Budget) approved late 1997 (which was cutback from previous years) was reflected in the 1998 Operational Metrics. So when the Capital does not go on line, the Budgeted expenses are less than the actual expenses, making the bottom line look good. However, very rarely do they remove the costs not incurred in wafer costs from the budget but rather make adjustments to the "forecasted" expenses. What this all boils down to is this, any unused Capital $$$ can be rolled over to the next year usually, even if it needs to be rejustified. However, not using the Capital $$$ in the present year allows the company to recalculate wafer costs and depreciation expenses for the upcoming year, thereby getting a "free" manufacturing cost improvement. The use or lose it mentality is giving way to improved fiscal control of the enterprise. If the ewuipment is truly needed it will be justified and purchased. This industry, thank goodness, does not run itself like the US government. We are as close to zero based budgeting as you get. No escalating year to year budgets, no penalties for being fiscally responsible, and most certainly, very close scrutiny of the dollars that are spent and how it will affect the enterprise 3-5 years down the road. Andrew