Using data envelopment analysis (DEA) to evaluate the operational performance of the wafer fabrication industry in Taiwan

Abstract

PurposeThe purpose of this paper is to use data envelopment analysis (DEA) to evaluate the efficiency of the wafer fabrication industry in Taiwan.Design/methodology/approachThe input variables are total assets, operation costs, and operation expenditures, and the output variable is net sales. This study uses the Pearson correlation to indicate positively correlation between input and output variables, applies DEA to analyze the efficiency scores, and utilizes Mann‐Whitney U‐test to compare the efficiency score of stock exchange market group (SEM group) with that of over‐the‐counter market group (OTC group). Moreover, this paper explores the efficiency performance over different periods by use of the Malmquist productive Index (MPI).FindingsThis study indicates that Taiwan Semiconductor Manufacturing Corporation (TSMC) has the most relative efficiency in the wafer fabrication industry of Taiwan. In addition, this study finds out the average constant returns to scale (CRS) efficiency of the Taiwanese wafer fabrication industry from 1999 to 2003 is 84.98 per cent, and the average CRS efficiencies of all nine wafer fabrication companies are over 70 per cent. This study finds out that net sales and scale efficiency of SEM group are higher than those of OTC group. Moreover, this study shows that the main inefficient causes of four companies of SEM group except TSMC and Nanya are from the inefficiency of variable returns to scale efficiency, while the main inefficient causes of all companies of OTC group are from the inefficiency of scale efficiency. Finally, according the results of the MPI in this study, the wafer fabrication industry should introduce the new technology to improve its technology change effect.Originality/valueThis study provides a valuable reference for wafer fabrication companies not only in reviewing their efficiency, but also in enhancing their operational performance.