Performance evaluation of the semiconductor industry based on a metafrontier approach
Abstract
The semiconductor industry has been regarded as one of the most important industries by Taiwan due to the market share of Taiwan’s semiconductor industry in 2011 ranked second worldwide. However, the European debt crisis triggered a global economic recession in 2011, causing Taiwan’s output of semiconductors in 2010 and 2011 to show negative growth. This paper will mainly explore, from the performance evaluation perspective, the Malmquist productivity index of the Taiwan’s semiconductor industry based on a metafrontier approach. The empirical results show that the European debt crisis in 2011 had an impact on Integrated circuit (IC) design companies and IC manufacturing companies, but that there was no influence on IC packaging and testing companies when measuring static efficiency. From the viewpoint of dynamic productivity performance, the paper finds that the main reason for the negative growth of IC packaging and testing companies and IC design companies came from a backward movement in technical change, but the main reason for the negative growth of IC manufacturing companies derived from a decline in pure technical efficiency.
Keyword : semiconductor industry, productivity, directional distance function, metafrontier
How to Cite
Chiu, C.-R., Fang, C.-L., Tsang, S.-S., & Chen, Y.-F. (2018). Performance evaluation of the semiconductor industry based on a metafrontier approach. Technological and Economic Development of Economy, 24(3), 825-843. https://doi.org/10.3846/20294913.2016.1218372
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Hsu, F. M.; Horng, D. J.; Hsueh, C. C. 2009. The effect of government-sponsored R&D programmes on additionality in recipient firms in Taiwan, Technovation 29(3): 204–217. https://doi.org/10.1016/j.technovation.2008.05.001
Hsu, L. C. 2015. Using a decision-making process to evaluate efficiency and operating performance for listed semiconductor companies, Technological and Economic Development of Economy 21(2): 301–331. https://doi.org/10.3846/20294913.2013.876689
Huang, C. W.; Chiu, Y. H.; Lin, C. H.; Liu, H. H. 2012. Using a hybrid systems DEA model to analyze the influence of automatic banking service on commercial banks’ efficiency, Journal of the Operations Research Society of Japan 55(4): 209–224.
Hung, S. W.; He, D. S.; Lu, W. M. 2014. Evaluating the dynamic performances of business groups from the carry-over perspective: a case study of Taiwan’s semiconductor industry, Omega – The International Journal of Management Science 46: 1–10. https://doi.org/10.1016/j.omega.2014.01.003
Hung, S. W.; Lu, W. M. 2008. The comparative productivity efficiency of Taiwan’s integrated circuits packaging/testing firms, INFOR: Information Systems and Operational Research 46(3): 189–198. https://doi.org/10.3138/infor.46.3.189
Kao, C. 2009. Efficiency decomposition in network data envelopment analysis: a relational model, European Journal of Operational Research 192(3): 949–962. https://doi.org/10.1016/j.ejor.2007.10.008
Kao, L. J.; Lu, C. C.; Chiu, C. C. 2011. The training institution efficiency of the semiconductor institute programme in Taiwan – application of spatiotemporal ICA with DEA approach, Journal of the Operational Research Society 62(12): 2162–2172. https://doi.org/10.1057/jors.2010.177
Kozmetsky, G.; Yue, P. 1998. Comparative performance of global semiconductor companies, Omega – The International Journal of Management Science 26(2): 153–175.
Lee, C. Y.; Johnson, A. L. 2011. A decomposition of productivity change in the semiconductor manufacturing industry, International Journal of Production Research 49(16): 4761–4785. https://doi.org/10.1080/00207543.2010.497507
Liu, F. H. F.; Wang, P. 2008. DEA Malmquist productivity measure: Taiwanese semiconductor companies, International Journal of Production Economics 112(1): 367–379. https://doi.org/10.1016/j.ijpe.2007.03.015
Lu, W. C. 2009. The evolution of R&D efficiency and marketability: evidence from Taiwan’s IC‐design Industry, Asian Journal of Technology Innovation 17(2): 1–26. https://doi.org/10.1080/19761597.2009.9668671
Lu, W. M.; Hung, S. W. 2010. Assessing the performance of a vertically disintegrated chain by the DEA approach-a case study of Taiwanese semiconductor firms, International Journal of Production Research 48(4): 1155–1170. https://doi.org/10.1080/00207540802484929
Lu, W. M.; Wang, W. K.; Tung, W. T.; Lin, F. 2010. Capability and efficiency of intellectual capital: the case of fabless companies in Taiwan, Exper Systems with Applications 37(1): 546–555. https://doi.org/10.1016/j.eswa.2009.05.031
Mahadevan, R. A. 2002. A DEA approach to understanding the productivity growth of Malaysia’s manufacturing industries, Asia Pacific Journal of Management 19: 587–600. https://doi.org/10.1023/A:1020577811369
Meng, W.; Hu, Z.; Liu, W. 2006. Efficiency evaluation of basic research in China, Scientometrics 69(1): 85–101. https://doi.org/10.1007/s11192-006-0140-y
Nazarko, J.; Šaparauskas, J. 2014. Application of DEA method in efficiency evaluation of public higher education institutions, Technological and Economic Development of Economy 20(1): 25–44. https://doi.org/10.3846/20294913.2014.837116
O’Donnell, C. J.; Rao, D. S. P.; Battese, G. E. 2008. Metafrontier frameworks for the study of firm-level efficiencies and technology ratios, Empirical Economics 34(2): 231–255.
Oh, D. H. 2010. A global Malmquist-Luenberger productivity index, Journal of Productivity Analysis 34(3): 183–197. https://doi.org/10.1007/s11123-010-0178-y
Oh, D. H.; Lee, J. 2010. A metafrontier approach for measuring Malmquist productivity index, Empirical Economics 38(1): 47–64. https://doi.org/10.1007/s00181-009-0255-0
O’Mahony, M.; Vecchi, M. 2009. R&D, knowledge spillovers and company productivity performance, Research Policy 38(1): 35–44.
Seiford, L.; Zhu, J. 1999. Profitability and Marketability of the Top 55 US Commercial Banks, Management Science 45(9): 1270–1288.
Shen, K. Y.; Tzeng, G. H. 2016. Combining DRSA decision-rules with FCA-based DANP evaluation for financial performance improvements, Technological and Economic Development of Economy 22(5): 685–714. https://doi.org/10.3846/20294913.2015.1071295
Sterlacchini, A. 1999. Do innovative activities matter to small firms in non-R&D-intensive industries? An application to export performance, Research Policy 28(8): 819–832. https://doi.org/10.1016/S0048-7333(99)00023-2
Taiwan Semiconductor Yearbook. 2012. Taiwan Industrial Technology Research Institute. Hsinchu, Taiwan (in Chinese).
Thore, S.; Phillips, F.; Ruefli, T.; Yue, P. 1996. DEA and the management of the product cycle: the US computer industry, Computers and Operations Research 23(4): 341–356. https://doi.org/10.1016/0305-0548(95)00043-7
Wang, E. C.; Huang, W. 2007. Relative efficiency of R&D activities: a cross-country study accounting for environmental factors in the DEA approach, Research Policy 36(2): 260–273. https://doi.org/10.1016/j.respol.2006.11.004
Wu, W. Y.; Tsai, H. J.; Cheng, K. Y.; Lai, M. 2006. Assessment of intellectual capital management in Taiwanese IC design companies: using DEA and the Malmquist productivity index, R&D Management 36(5): 531–545. https://doi.org/10.1111/j.1467-9310.2006.00452.x
Caves, D. W.; Christensen, L. R.; Diewert, W. E. 1982. The economic theory of index numbers and the measurement of input, output, and productivity, Econometrica: Journal of the Econometric Society 50(6): 1393–1414. https://doi.org/10.2307/1913388
Chang, P. L.; Tsai, C. T. 2002. Finding the niche position-competition strategy of Taiwan’s IC design industry, Technovation 22(2): 101–111. https://doi.org/10.1016/S0166-4972(00)00093-6
Charnes, A.; Cooper, W. W.; Rhodes, E. 1978. Measuring the efficiency of decision-making units, European Journal of Operational Research 2(6): 429–444. https://doi.org/10.1016/0377-2217(78)90138-8
Chen, C. F.; Sewell, G. 1996. Strategies for technological development in South Korea and Taiwan: the case of semiconductors, Research Policy 25(5): 759–783. https://doi.org/10.1016/0048-7333(95)00861-6
Chen, C. J.; Chang, L. S. 2004. New product development strategy of IC design houses in Taiwan, Journal of American Academy of Business 5(1/2): 188–192.
Chen, C. J.; Wu, H. L.; Lin, B. W. 2006. Evaluating the development of high-tech industries: Taiwan’s science park, Technological Forecasting and Social Change 73(4): 452–465. https://doi.org/10.1016/j.techfore.2005.04.003
Chen, K. H.; Yang, H. Y. 2011. A cross-country comparison of productivity growth using the generalised metafrontier Malmquist productivity index: with application to banking industries in Taiwan and China, Journal of Productivity Analysis 35(3): 197–212. https://doi.org/10.1007/s11123-010-0198-7
Chen, Y. S.; Chen, B. Y. 2011. Applying DEA, MPI, and grey model to explore the operation performance of the Taiwanese wafer fabrication industry, Technological Forecasting and Social Change 78(3): 536–546.
Chu, M. T.; Shyu, J. Z.; Khosla, R. 2008. Measuring the relative performance for leading fabless firms by using data envelopment analysis, Journal of Intelligent Manufacturing 19(3): 257–272. https://doi.org/10.1007/s10845-008-0079-3
Chung, Y. H.; Fare, R.; Grosskopf, S. 1997. Productivity and undesirable outputs: a directional distance function approach, Journal of Environmental Management 51: 229–240. https://doi.org/10.1006/jema.1997.0146
Eilat, H.; Golany, B.; Shtub, A. 2006. Constructing and evaluating balanced portfolios of R&D projects with interactions: a DEA based methodology, European Journal of Operational Research 172(3): 1018–1039. https://doi.org/10.1016/j.ejor.2004.12.001
Färe, R.; Grosskopf, S.; Norris, M.; Zhang, Z. 1994. Productivity growth, technical progress, and efficiency change in industrialized countries, The American Economic Review 84: 66–83.
Graves, S. B.; Langowitz, N. S. 1996. R&D productivity: a global multi-industry comparison, Technological Forecasting and Social Change 53(2): 125–137. https://doi.org/10.1016/S0040-1625(96)00068-6
Halkos, G. E.; Tzeremes, N. G. 2007. International competitiveness in the ICT industry: evaluating the performance of the top 50 companies, Global Economic Review 36(2): 167–182. https://doi.org/10.1080/12265080701374115
Hall, B. H.; Ziedonis, R. H. 2001. The patent paradox revisited: an empirical study of patenting in the US semiconductor industry, 1979–1995, Rand Journal of Economics 32: 101–128. https://doi.org/10.2307/2696400
Hitt, M. A.; Hoskisson, R. E.; Ireland, R. D.; Harrison, J. S. 1991. Effects of acquisitions on R&D inputs and outputs, Academy of Management Journal 34: 693–706. https://doi.org/10.2307/256412
Hsiao, F. S. T.; Park, C. 2005. Korean and Taiwanese productivity performance: comparisons at matched manufacturing levels, Journal of Productivity Analysis 23(1): 85–107. https://doi.org/10.1007/s11123-004-8549-x
Hsu, C. W.; Chiang, H. C. 2001. The government strategy for the upgrading of industrial technology in Taiwan, Technovation 21(2): 123–132. https://doi.org/10.1016/S0166-4972(00)00029-8
Hsu, F. M.; Horng, D. J.; Hsueh, C. C. 2009. The effect of government-sponsored R&D programmes on additionality in recipient firms in Taiwan, Technovation 29(3): 204–217. https://doi.org/10.1016/j.technovation.2008.05.001
Hsu, L. C. 2015. Using a decision-making process to evaluate efficiency and operating performance for listed semiconductor companies, Technological and Economic Development of Economy 21(2): 301–331. https://doi.org/10.3846/20294913.2013.876689
Huang, C. W.; Chiu, Y. H.; Lin, C. H.; Liu, H. H. 2012. Using a hybrid systems DEA model to analyze the influence of automatic banking service on commercial banks’ efficiency, Journal of the Operations Research Society of Japan 55(4): 209–224.
Hung, S. W.; He, D. S.; Lu, W. M. 2014. Evaluating the dynamic performances of business groups from the carry-over perspective: a case study of Taiwan’s semiconductor industry, Omega – The International Journal of Management Science 46: 1–10. https://doi.org/10.1016/j.omega.2014.01.003
Hung, S. W.; Lu, W. M. 2008. The comparative productivity efficiency of Taiwan’s integrated circuits packaging/testing firms, INFOR: Information Systems and Operational Research 46(3): 189–198. https://doi.org/10.3138/infor.46.3.189
Kao, C. 2009. Efficiency decomposition in network data envelopment analysis: a relational model, European Journal of Operational Research 192(3): 949–962. https://doi.org/10.1016/j.ejor.2007.10.008
Kao, L. J.; Lu, C. C.; Chiu, C. C. 2011. The training institution efficiency of the semiconductor institute programme in Taiwan – application of spatiotemporal ICA with DEA approach, Journal of the Operational Research Society 62(12): 2162–2172. https://doi.org/10.1057/jors.2010.177
Kozmetsky, G.; Yue, P. 1998. Comparative performance of global semiconductor companies, Omega – The International Journal of Management Science 26(2): 153–175.
Lee, C. Y.; Johnson, A. L. 2011. A decomposition of productivity change in the semiconductor manufacturing industry, International Journal of Production Research 49(16): 4761–4785. https://doi.org/10.1080/00207543.2010.497507
Liu, F. H. F.; Wang, P. 2008. DEA Malmquist productivity measure: Taiwanese semiconductor companies, International Journal of Production Economics 112(1): 367–379. https://doi.org/10.1016/j.ijpe.2007.03.015
Lu, W. C. 2009. The evolution of R&D efficiency and marketability: evidence from Taiwan’s IC‐design Industry, Asian Journal of Technology Innovation 17(2): 1–26. https://doi.org/10.1080/19761597.2009.9668671
Lu, W. M.; Hung, S. W. 2010. Assessing the performance of a vertically disintegrated chain by the DEA approach-a case study of Taiwanese semiconductor firms, International Journal of Production Research 48(4): 1155–1170. https://doi.org/10.1080/00207540802484929
Lu, W. M.; Wang, W. K.; Tung, W. T.; Lin, F. 2010. Capability and efficiency of intellectual capital: the case of fabless companies in Taiwan, Exper Systems with Applications 37(1): 546–555. https://doi.org/10.1016/j.eswa.2009.05.031
Mahadevan, R. A. 2002. A DEA approach to understanding the productivity growth of Malaysia’s manufacturing industries, Asia Pacific Journal of Management 19: 587–600. https://doi.org/10.1023/A:1020577811369
Meng, W.; Hu, Z.; Liu, W. 2006. Efficiency evaluation of basic research in China, Scientometrics 69(1): 85–101. https://doi.org/10.1007/s11192-006-0140-y
Nazarko, J.; Šaparauskas, J. 2014. Application of DEA method in efficiency evaluation of public higher education institutions, Technological and Economic Development of Economy 20(1): 25–44. https://doi.org/10.3846/20294913.2014.837116
O’Donnell, C. J.; Rao, D. S. P.; Battese, G. E. 2008. Metafrontier frameworks for the study of firm-level efficiencies and technology ratios, Empirical Economics 34(2): 231–255.
Oh, D. H. 2010. A global Malmquist-Luenberger productivity index, Journal of Productivity Analysis 34(3): 183–197. https://doi.org/10.1007/s11123-010-0178-y
Oh, D. H.; Lee, J. 2010. A metafrontier approach for measuring Malmquist productivity index, Empirical Economics 38(1): 47–64. https://doi.org/10.1007/s00181-009-0255-0
O’Mahony, M.; Vecchi, M. 2009. R&D, knowledge spillovers and company productivity performance, Research Policy 38(1): 35–44.
Seiford, L.; Zhu, J. 1999. Profitability and Marketability of the Top 55 US Commercial Banks, Management Science 45(9): 1270–1288.
Shen, K. Y.; Tzeng, G. H. 2016. Combining DRSA decision-rules with FCA-based DANP evaluation for financial performance improvements, Technological and Economic Development of Economy 22(5): 685–714. https://doi.org/10.3846/20294913.2015.1071295
Sterlacchini, A. 1999. Do innovative activities matter to small firms in non-R&D-intensive industries? An application to export performance, Research Policy 28(8): 819–832. https://doi.org/10.1016/S0048-7333(99)00023-2
Taiwan Semiconductor Yearbook. 2012. Taiwan Industrial Technology Research Institute. Hsinchu, Taiwan (in Chinese).
Thore, S.; Phillips, F.; Ruefli, T.; Yue, P. 1996. DEA and the management of the product cycle: the US computer industry, Computers and Operations Research 23(4): 341–356. https://doi.org/10.1016/0305-0548(95)00043-7
Wang, E. C.; Huang, W. 2007. Relative efficiency of R&D activities: a cross-country study accounting for environmental factors in the DEA approach, Research Policy 36(2): 260–273. https://doi.org/10.1016/j.respol.2006.11.004
Wu, W. Y.; Tsai, H. J.; Cheng, K. Y.; Lai, M. 2006. Assessment of intellectual capital management in Taiwanese IC design companies: using DEA and the Malmquist productivity index, R&D Management 36(5): 531–545. https://doi.org/10.1111/j.1467-9310.2006.00452.x