Supply Chain Planning for IC Design House Back-End Production Network With Turnkey Service

Abstract

Owing to global competition, integrated circuit (IC) design houses are facing challenges in the optimal use of capacity and resources to fulfill customer demands and maximize profit. A hybrid make-to-stock (MTS) and make-to-order (MTO) model is generally used. Wafer procurement is made according to customers’ long-term demand forecast based on MTS. Limited wafer fab resources and back-end capacity are first allocated to on-hand orders and then to forecast demand. In production planning, several factors need to be considered to determine the production quantity and inventory level, such as the material, capacity, substitute, technical constraint, and order tardiness. This study considers a typical multi-stage supply chain network of semiconductor back-end production with turnkey service for IC design houses. The objective is to maximize the total profit with the constraints of equipment capacity, the flexibility of substitutes, and the usage of the turnkey mode. The problem is formulated with a mixed-integer programming model and solved using two novel heuristic algorithms: a product-based decomposition (PD_SCP) with profit-based criteria and a Lagrangian decomposition combined with the product-based decomposition (LD-SCP) method. Using the LD-SCP algorithm takes a long time but results in a great solution. Sensitivity analysis is conducted to investigate the impact of different parameters on production cost and total profit.