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Demand Uncertainty and the Choice of Business Model in the Semiconductor Industry

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Abstract

In this paper, we provide another reason that may explain the wide adoption of outsourcing approach in the semiconductor industry. We show the fab-lite business model of outsourcing wafer fabrication to foundries is optimal in the presence of demand uncertainty. This is because outsourcing helps the integrated device manufacturer (largely the brand-producing firm) to lower its cost of capital investment in the case of low demand and to improve its capacity allocation in the case of high demand.

참고문헌 (15)

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