International Conference on Economics, Finance & Business, London

THE IMPACT OF THE SEMICONDUCTOR EXPORTS BANS TO CHINA ON THE STOCK PRICES IN TAIWAN'S SEMICONDUCTOR INDUSTRY

BI-HUEI TSAI, PEI-PEI WANG

Abstract:

This study employs event study methodology to investigate whether U.S. semiconductor exports bans to China affect the Taiwanese semiconductor stock market, leading to negative abnormal returns in Taiwan's semiconductor industry prices. The research then segments the semiconductor industry into upstream IC design, midstream IC manufacturing, and downstream IC packaging and testing industries. We use ANOVA and independent sample t-tests to explore whether there are significant differences in the impact of U.S. sanctions on Chinese semiconductors across the upstream, midstream, and downstream sectors of Taiwan's semiconductor industry. The results of this study find that the U.S. sanctions on Chinese semiconductors result in significantly negative abnormal returns for Taiwan's semiconductor industry, including the upstream IC design sector and the midstream manufacturing sector. However, the U.S. sanctions on Chinese semiconductors do not result in significantly negative abnormal returns for Taiwan's downstream IC packaging and testing industry. This is possibly caused by the market sensitivity and risk perception of IC design industry since the IC design industry is highly dependent on advanced technology and innovation. Additionally, in the sales chain of the semiconductor industry, upstream IC designers actually play the role of sellers. After receiving orders and completing the design, the upstream IC design manufacturers entrust midstream IC manufacturers with the task of manufacturing the ICs according to the design drawings and then hand them over to downstream packaging and testing manufacturers for packaging and testing. The U.S. sanctions enable investors to expect the difficulty of Taiwan’s IC design industry in obtaining orders from Chinese companies. Investors sell the stock of Taiwan’s IC design industry, so the stock prices of Taiwan’s IC design industry decline substantially. Negative abnormal returns are generated during the announcement of U.S exports bans to China. The impact of U.S. sanctions on Chinese semiconductors is obviously more significant on Taiwan's upstream IC design industry than on the midstream manufacturing and downstream packaging and testing industries. Conversely, the gap in the impact between Taiwan's midstream manufacturing and downstream IC packaging and testing industries is small.

Keywords: Semiconductor Industry; Event Study; Stock Prices; Sanctions; Abnormal Return