Economic Efficiency Analysis of Wafer Fabrication

Economic efficiency analysis of semiconductor fabrication facilities (fabs) involves tradeoffs among cost, yield, and cycle time. Due to the disparate units involved, direct evaluation and comparison is difficult. This article employs data envelopment analysis (DEA) to determine relative efficiencies among fabs over time on the basis of empirical data, whereby cycle time performance is transformed into monetary value according to an estimated price decline rate. Two alternative DEA models are formulated to evaluate the influence of cycle time and other performance attributes. The results show that cycle time and yield follow increasing returns to scale, just as do cost and resource utilization. Statistical analyses are performed to investigate the DEA results, leading to specific improvement directions and opportunities for relatively inefficient fabs. Note to Practitioners-Speed of manufacturing is an important metric of factory performance, yet it has long been a challenge to integrate its value into overall performance evaluation. However, for many semiconductor products, a predictable rate of decline in selling prices makes it possible to transform time value into monetary value. This study employs a novel method to incorporate a speed metric into economic efficiency evaluation and thereby provide a guideline for improving fab efficiency in manufacturing practice. Furthermore, this study integrates factory productivity and cycle time into a relative efficiency analysis model that jointly evaluates the impact of these two factors in manufacturing performance. In particular, we validate this approach with data from ten leading wafer fabs obtained by the Competitive Semiconductor Manufacturing Program and we discuss managerial implications.