Coordinating Strategic Capacity Planning in the Semiconductor Industry

Abstract

We study strategic capacity planning in the semiconductor industry. Working with a major US semiconductor manufacturer on the configuration of their worldwide production facilities, we identify two unique characteristics of this problem as follows: (1) wafer demands and manufacturing capacity are both main sources of uncertainty, and (2) capacity planning must consider the distinct viewpoints from marketing and manufacturing. We formulate a multi-stage stochastic program with demand and capacity uncertainties. To reconcile the marketing and manufacturing perspectives, we consider a decomposition of the planning problem resembling decentralized decision-making. We develop recourse approximation schemes representing different decentralization schemes, which vary in information requirements and complexity. We show that it is possible to arrive at near optimal solutions (within 6.5%) with information decentralization while using a fraction (16.2%) of the computer time.

Models for production planning under uncertainty: A review

“…They use a robust approach avoiding the inherent complexities in a nonlinear stochastic formulation. Karabuk and Wu (1999) develop a strategic capacity planning model for a major semi-conductor manufacturer. They formulate a multi-stage stochastic program with recourses, where demand and capacity uncertainties are incorporated via a scenario structure.…”

A multistage scenario optimisation procedure to plan annualised working hours under demand uncertainty

“…For example, Eppen et al (1989) model the strategic capacity-planning problem of a major automobile manufacturer using a stochastic programming approach based on demand scenarios; Escudero and Kamesam (1995) solved a scenario-based stochastic production-planning problem with demand uncertainty; Karabuk and Wu (1999) formulated a multistage stochastic program for a capacity-planning problem for a major semi-conductor manufacturer in which demand and capacity uncertainties were incorporated via a scenario structure.…”

Decentralizing semiconductor capacity planning via internal market coordination

“…It is common in the ind ustry to set the target at as high as 90%. For further discussion of the utilization target, see (Karabuk and Wu, 1999). The second stage objective is defined by the underage or overage adjustments from the PM request under each senario s ∈S 2 .…”

“…The complete numerical data is given in the Appendix. The data set is generated following the same methodology used in Karabuk and Wu (1999).…”

“…Capacity planning in the industry typically entails strategic, and operational planning organized in a hierarchical manner. Strategic planning decis ions specify which microelectronics technology at what capacity level within what timeframe is in need to meet expected future demands, and which fabrication (fab) facilities should be equipped and certified to product with which technologies (Karabuk and Wu, 1999).…”