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To produce high-quality and cost-effective multichip systems, they must be designed with test and fault diagnosis as critical design requirements. However, deciding on where and when to test, and whether to apply design for test (DFT) and built-in self test (BIST) at the IC, multichip module (MCM) or board level requires considerable study and evaluation to determine the economics of the various solutions and the payback. In this paper we explore the tradeoffs between various test and rework strategies for multichip module designs. Some of these strategies incorporate various DFT options at both the MCM and IC levels. We will analyze the impact of various cost, yield, and test effectiveness parameters on the final cost and quality of multichip modules. Experimental tradeoff analysis data generated for some leading-edge multichip designs will also be presented. The results clearly indicate that incorporating DFT and BIST with varying degrees at the chip or MCM levels is economically justifiable and results in cost reduction as well as quality improvement. The results also indicates that the MCM cost could vary by about 10–20% depending on the test strategy used. However, proper determination of where and how to test, and whether to employ DFT and BIST at the IC or MCM levels, requires an evaluation of the economics of the various solutions and the payback. That process is highly dependent on the design under consideration and the parameters associated with the available manufacturing environment(s). Hence, one has to be careful about generalizing the lessons learned from specific cases, since it could lead to non optimal solutions. A careful economic modeling of the various design, test and manufacturing parameters is clearly necessary for producing cost-effective high-quality products.