Abstract
TFT-LCD industry is facing crucial challenges such as demand uncertainty, shortening product life cycle, and fast technology migration, resulting in inaccurate demand forecast, long production lead time, and lower production yield. In order to fulfill the demands, the high-tech company has to analyze capacity planning and expansion decisions from upstream to downstream to meet various demands, and absorb potential short-term demand shortage loss simultaneously. Capacity planning strategy is critical for the TFT-LCD industry that is capital-intensive and technology-intensive, with long lead time for capacity expansion and production, diversified products and shortening product life cycle. Thus, the present problem consists of various risks for capacity expansion under demand uncertainty. This study aims to develop a decision model for capacity expansion planning under demand uncertainty, in which the TFT-LCD module assembly plant under the highly demand uncertainty is used for empirical study. The proposed framework consists of systematic steps considering production cost, capacity idle cost, shortage cost, return on investment rate, and the lead time of capacity expansion to determine the optimal capacity expansion decision and capacity allocation plan for maximizing the expected profit. The case study in a leading TFT-LCD company has validated the practical viability of the proposed approach. This study concludes with discussion of contributions and future research directions.