{"title":"Recovering from geopolitical risk: An event study of Huawei's semiconductor supply chain","authors":"","doi":"10.1016/j.ijpe.2024.109347","DOIUrl":null,"url":null,"abstract":"<div><p>Amidst the ongoing globalisation of supply chains, geopolitical issues have emerged as a significant source of supply chain risk for firms. This has recently been illustrated in the trade sanctions adopted by the US against the Chinese semiconductor industry, particularly in the accessing of semiconductor chips. A notable event here, that we focus on in this paper, involves how the leading telecommunications company Huawei has been impacted by this and most interestingly how they have been able to respond, by being able to successfully launch new chip-based products during the US semiconductor chip technology blockade, despite the sanctions ban. This has been achieved with the support of key supplier, SMIC, who has become a major 7 nm chip supplier for Huawei. Employing the event study research method, this study initially examines the stock market's response to Huawei's new product release with these new SMIC-sourced semiconductor chips. It also appraises the propagation effects on Huawei's and SMIC's supply chain partners. This exposes the differential impact on the supply chain members of Huawei (focal firm) and SMIC (main supplier). The results reveal predominantly positive responses from Huawei's suppliers and customers, as well as SMIC's suppliers and customers, to these incidents, with Huawei's suppliers' and SMIC's suppliers' and customers' share prices responding positively to the release of Huawei's new product, exhibiting substantial median stock market reaction of 1.53%, 1.62%, and 2.52% on Day 0, respectively, it shows, in contrast, that Huawei's customers did not exhibit a positive share price reaction to the development of this newly sourced product. It is noteworthy that SMIC's supply of chips to Huawei has had a significantly positive impact on both Huawei and SMIC's suppliers and customers. With the impact varying across different roles within the supply chains, this study provides useful insights for understanding the propagation effect of good news in the supply chain resulting from firms' proactive action in response to imposed sanctions for a key supply component.</p></div>","PeriodicalId":14287,"journal":{"name":"International Journal of Production Economics","volume":null,"pages":null},"PeriodicalIF":9.8000,"publicationDate":"2024-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0925527324002044/pdfft?md5=9554e0fccc077b2d16042cd60dd5a212&pid=1-s2.0-S0925527324002044-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Journal of Production Economics","FirstCategoryId":"5","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0925527324002044","RegionNum":1,"RegionCategory":"工程技术","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ENGINEERING, INDUSTRIAL","Score":null,"Total":0}
引用次数: 0
Abstract
Amidst the ongoing globalisation of supply chains, geopolitical issues have emerged as a significant source of supply chain risk for firms. This has recently been illustrated in the trade sanctions adopted by the US against the Chinese semiconductor industry, particularly in the accessing of semiconductor chips. A notable event here, that we focus on in this paper, involves how the leading telecommunications company Huawei has been impacted by this and most interestingly how they have been able to respond, by being able to successfully launch new chip-based products during the US semiconductor chip technology blockade, despite the sanctions ban. This has been achieved with the support of key supplier, SMIC, who has become a major 7 nm chip supplier for Huawei. Employing the event study research method, this study initially examines the stock market's response to Huawei's new product release with these new SMIC-sourced semiconductor chips. It also appraises the propagation effects on Huawei's and SMIC's supply chain partners. This exposes the differential impact on the supply chain members of Huawei (focal firm) and SMIC (main supplier). The results reveal predominantly positive responses from Huawei's suppliers and customers, as well as SMIC's suppliers and customers, to these incidents, with Huawei's suppliers' and SMIC's suppliers' and customers' share prices responding positively to the release of Huawei's new product, exhibiting substantial median stock market reaction of 1.53%, 1.62%, and 2.52% on Day 0, respectively, it shows, in contrast, that Huawei's customers did not exhibit a positive share price reaction to the development of this newly sourced product. It is noteworthy that SMIC's supply of chips to Huawei has had a significantly positive impact on both Huawei and SMIC's suppliers and customers. With the impact varying across different roles within the supply chains, this study provides useful insights for understanding the propagation effect of good news in the supply chain resulting from firms' proactive action in response to imposed sanctions for a key supply component.
期刊介绍:
The International Journal of Production Economics focuses on the interface between engineering and management. It covers all aspects of manufacturing and process industries, as well as production in general. The journal is interdisciplinary, considering activities throughout the product life cycle and material flow cycle. It aims to disseminate knowledge for improving industrial practice and strengthening the theoretical base for decision making. The journal serves as a forum for exchanging ideas and presenting new developments in theory and application, combining academic standards with practical value for industrial applications.