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Coordinating Strategic Capacity Planning in the Semiconductor Industry

Author

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  • Suleyman Karabuk

    (Department of Industrial and Systems Engineering, Lehigh University, Bethlehem, Pennsylvania 18015)

  • S. David Wu

    (Department of Industrial and Systems Engineering, Lehigh University, Bethlehem, Pennsylvania 18015)

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.

Suggested Citation

  • Suleyman Karabuk & S. David Wu, 2003. "Coordinating Strategic Capacity Planning in the Semiconductor Industry," Operations Research, INFORMS, vol. 51(6), pages 839-849, December.
    • Handle: RePEc:inm:oropre:v:51:y:2003:i:6:p:839-849
    DOI: 10.1287/opre.51.6.839.24917
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    References listed on IDEAS

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