The make-or-buy problem: A multidimensional perspective of foundry decisions

This paper discusses the widely known make-or-buy problem. In the semiconductor industry this problem is generally known as the ''foundry decision''. This industry has experienced an increased level of wafer fabrication outsourcing in recent years and it is expected that manufacturers will continue to make extended use of foundries in the future. This paper advances the notion that foundry decisions should be assessed along four principal dimensions or objectives: (1) maximization of strategic competitive performance, (2) maximization of managerial performance, (3) minimization of sourcing risks, and (4) maximization of financial performance. This multiple criteria approach avoids the common pitfall of relying exclusively on financial factors when weighing the pros and cons of each sourcing alternative.