In laying out integrated circuits on a substrate, the placement of the components relative to each other is important in minimizing conductor area and hence chip area. Large scale integration often uses polycells which are lined up in rows to realize the digital logic circuitry. A partitioning procedure is disclosed which iteratively separates the cells into maximally connected subcells, eventually to assign them to rows so as to minimize conductor area. A technique called terminal propagation takes into account at every iteration the location of connections outside of the partitioned area. Rectilinear Steiner trees are generated to aid in terminal propagation.