A system dynamics model for capacity planning in the semiconductor industry

• Main Author: Foong, Yong Qing
• Other Authors: Chen Songlin
• Format: Final Year Project
• Language: English
• Published: Nanyang Technological University 2022
• Subjects: Engineering::Industrial engineering::Engineering management; Engineering::Manufacturing::Production management
• Online Access: https://hdl.handle.net/10356/158531
• Institution: Nanyang Technological University

The global chip shortage has begun in early 2020 and persisting even after 2 years. The semiconductor industry has been running its production line at near full capacity and trying to ramp up its fabrication capacity. In this study, a System Dynamics model is developed to facilitate capacity planning in the semiconductor industry and is extended for planning under irregular conditions. The System Dynamics approach is used due to its ability to illustrate system behaviour and information feedback. In the simulation, a base model is first developed based on production without any disruption and it’s then modified and extended its application in irregular conditions. In this study, to simulate the global chip shortage condition, events such as stock piling and order amplification are introduced into the extended model. When there are no disruptions in the semiconductor supply chain, the capacity can be simply planned according to the demand trend. However, under irregular conditions, capacity planned according to the demand can lead to undesirable situations such as low order fulfilment rate or capacity overage. Especially, in the condition of global chip shortage, production is held up by the delayed capacity expansion and disturbed by the amplified order. Furthermore, a significant amount of capacity overage is observed after desired capacity is achieved. Therefore, additional policies need to be included to plan capacity under irregular conditions to avoid capacity overage.