The effects of Sn diffusion, Ag and Pd dispersion and intermetallic compound growth on the shear fatigue of solder joints between thick film mixed bonded Pd-Ag conductor and 62Sn-36Pb-2Ag solder are investigated. The samples were prepared by assembling leadless ceramic chip carrier (LCCC) passive components on a 96% Al/sub 2/O/sub 3/ substrate and ageing at 150/spl deg/C for varying times. Microstructural analysis reveals that the intermetallic compounds (IMC) Pd/sub 3/Sn/sub 2/, Pd/sub 3/Sn, Pd/sub 2/Sn, PdSn, PdSn/sub 2/, PdSn/sub 4/, Ag/sub 5/Sn, Ag/sub 3/Sn, PbPd/sub 3/, and Pb/sub 3/Pd/sub 5/ are formed after ageing. X-ray dot maps demonstrate that the longer the ageing time, the more serious the Ag and Pd dispersion into the solder and the Sn diffusion into the conductor. It is noted that the Sn diffuses to the interface of the substrate/conductor after 120 hours ageing. Shear strength tests at varying strain rates show that adhesion strength decreases with prolonged ageing time. Shear cycling tests indicate that the solder joint fatigue lifetime depends on the Ag and Pd diffusion range, and especially on Sn diffusion into the thick film conductor. These results mean that the more serious the Sn and Ag interdiffusion, and the more IMC is formed in the solder joint (which can be due to prolonged high temperature storage or long term operation of SMT assemblies), the more sensitive is the solder joint to stress, eventually leading to fatigue failure. It is argued that volume change and increased brittleness due to intermetallic formation, and conductor layer volume swelling due to Sn diffusion are major factors in the decrease of solder joint fatigue lifetime and shear strength.