Based on the PW method, should the project be approved?
Semiconductor manufacturing involves taking a flat disc of silicon, called a wafer, and depositing many layers of material on top of it. Each layer has a pattern on it that, upon completion, defines the electric circuits of the finished microprocessor.
Each 8-inch wafer has up to 100 microprocessors on it.
However, the typical average yield of the production line is 75% good microprocessors per wafer.
At one local company, the process engineers responsible for the chemical-vapor-deposition (CVD) tool (i.e., process equipment) that deposits one of the many layers have an idea for improving overall yield. They propose to improve this tool’s vacuum with a redesign of one of its major components.
The engineers believe the Project will result in a 2% increase in the average production yield of nondefective microprocessors per wafer.
This company has only one CVD tool, and it can process 10 wafers per hour.
The process engineers have determined that the CVD tool has an average utilization rate (i.e., «time running») of 80%.
A wafer costs €5,000 to manufacture, and a good microprocessor can be sold for €100.
These semiconductor fabrication plants («fabs») operate 168 hours per week, and all good microprocessors produced can be sold.
The capital investment required for the Project is €250,000, and maintenance and support expenses are expected to be €25,000 per month.The lifetime of the modified tool will be five years, and the company uses a 12% MARR per year (compounded monthly) as its «hurdle rate».
Before implementing the proposed engineering solution, top management has posed the following questions to you (hired as an independent consultant) to evaluate the merits of the proposal:
— Based on the PW method, should the project be approved?
— If the achievable improvement in production yield has been overestimated by the process engineers, at what percent yield improvement would the Project breakeven?