This paper reviews the logic failure analysis process and emphasizes the critical need for fault localization using software-based diagnostics. Continuous improvements in yield, reliability, time- to-market, and customer satisfaction all depend on quick corrective-action implementation through root cause failure analysis. Fault localization is the first and most critical step in the failure analysis process. This paper reviews the two primary localization methods: software-based diagnostics such as scan, and hardware diagnostics adapted to the back side of the die. Software diagnostics are emphasized as the method of choice with hardware diagnostics limited to a complementary role because of reduced coverage of defect types.