Risk assessment of production capacity investment in growing component market

S. Wu, H. Onari

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Supply and demand increase rapidly in a Hi-Tech component market which is in its growing stage, due to the demand increase of finished products with components performance improvement. Intense price competition among the component manufacturers occurs due to less difference in component performance within same generation. In this type of market, large errors often occur between the predicted market price and the actual price, as a result, high amount capacity investment is very susceptible to price prediction errors. If a mistake is made in the decision-making of capacity investment, the component manufacturer may face huge loss. In the worst case, the component manufacturer may have to make the decision on whether to withdraw from the market. In the past, Japanese component manufacturers led the world with low-margin high-turnover strategy in such uncertain market with their high technological innovation in production. But in recent years, they have lost in the price competition with Korea and Taiwan companies. The reason is thought to be the change of market environment, such as the market expansion with globalization. In this study, we will focus on the decision-making of capacity investment. Characteristics of manufacturers are defined the as different estimation of the demand sensitivity with price decrease and experience curve of investment amount which are the required information for decision-making. In this study, after the modeling of decision-making of capacity investment, the deficit risk of production capacity investment with different characteristics of manufacturers is to be evaluated. To avoid the deficit risk, how to correct the estimation of the information of the demand sensitivity with price decrease and experience curve of investment amount while doing the decision-making of capacity investment under a growing market is shown in the result.

Original languageEnglish
Title of host publication24th International Conference on Production Research, ICPR 2017
EditorsMarek Fertsch, Agnieszka Stachowiak, Beata Mrugalska, Joanna Oleskow-Szlapka, Lukasz Hadas, Piotr Cyplik, Paulina Golinska-Dawson
PublisherDEStech Publications
Pages341-347
Number of pages7
ISBN (Electronic)9781605955070
Publication statusPublished - 2017
Event24th International Conference on Production Research, ICPR 2017 - Poznan, Poland
Duration: 2017 Jul 302017 Aug 3

Publication series

Name24th International Conference on Production Research, ICPR 2017

Conference

Conference24th International Conference on Production Research, ICPR 2017
CountryPoland
CityPoznan
Period17/7/3017/8/3

Keywords

  • Capacity investment
  • Component market
  • Price uncertainty
  • Risk assessment

ASJC Scopus subject areas

  • Computer Science Applications
  • Industrial and Manufacturing Engineering
  • Control and Systems Engineering

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  • Cite this

    Wu, S., & Onari, H. (2017). Risk assessment of production capacity investment in growing component market. In M. Fertsch, A. Stachowiak, B. Mrugalska, J. Oleskow-Szlapka, L. Hadas, P. Cyplik, & P. Golinska-Dawson (Eds.), 24th International Conference on Production Research, ICPR 2017 (pp. 341-347). (24th International Conference on Production Research, ICPR 2017). DEStech Publications.