Abstract
ABSTRACT In this study, using the 2011 financial data of 35 Taiwanese IC design companies as sources, we utilize the Data Envelopment Analysis (DEA) through two models: the input-oriented Charnes, Cooper, and Rhodes (CCR) model as well as the Banker, Charnes, and Cooper (BCC) model for the overall and the pure technical efficiencies. Then, we estimated the scale efficiency and thus conducted the efficiency analysis, analysis of returns to scale, slack variable analysis, and sensitivity analysis. Furthermore, we were able to develop a profit-marketability matrix depending on the Boston Consulting Group (BCG)’s matrix concept and define what the star, cash cow, question, and dog industries are. Hence, we can provide insight to the strategies of representative companies and a set of suggestions. The Taiwanese IC design industry is not efficient that, instead of maximizing profits and market values, it creates a waste of resources due to the misallocation of inputs. As a whole, many of the IC design companies have scales that are often insufficient. Thus, we suggest that an increase of operational scales to achieve scale economies. The results of the slack variable analysis showed that reducing research and development expenses and the number of employees unneeded is crucial to reduce inefficiency; whereas the results of the sensitivity analysis show that the shareholders’ equity and net profits are the most influential variables. Moreover, we also found that Taiwanese IC design industry’s profitability performance was superior to its marketability, although they are not necessarily highly correlated with each other. As a result, the companies can only improve their effectiveness and apply their improving strategies successfully after taking account to the efficiency performances.