Intel Corp (INTC)

[SemiconEng]

I think Bryant's answer was that they were expecting to get even more cost out in the quarter but it didn't happen.
Bryant said you could shut a line and take a one time write off for the remaining depreciation... but they prefer to risk underutilization in order to have capacity available for an up tick (the investor view versus the trader). The good news is the capacity can still be used for saleable products. This puts Intel in a very good position for an upturn, but they do have to deal with the potential for underutilization charges each quarter.

This seems to verify what I said before regarding startup costs vs. cost reduction. When starting up the 0.13u process, intel probably cared little about the cost, and once things were up and running, then the cost reduction stuff probably started. Maybe intel didn't start the cost reductions soon enough for it to pay off this quarter, combined with the continuing sluggish sales, resulted in less payback then expected?

As far as the underutilization, if there was some sort of cutback in wafer starts, then the installed tools could be turned off temporarily. In that way, even though you would still be charged some amount for the capital expense depreciation, you could still save some money on Maintanence Labor Costs, Spare Parts, Electricity, etc. Not much savings, but something. Then, as you say, when things get better, then you turn the tools back on.

Semi