Volume 21, Number 1, June 2026
| Capital market reactions to overseas fab investment by Taiwan semiconductor manufacturing company limited (TSMC) facing geopolitical risk |
Abstract
In the face of rising deglobalization and geopolitical risk, the global semiconductor supply chain has transitioned from an “efficiency-oriented” to a “resilience-oriented” paradigm. Thus, a firm’s choice of location for overseas fab investment may affect operational costs, policy subsidies, supply chain security, and capital market pricing. Examining Taiwan Semiconductor Manufacturing Company Limited (TSMC) as a key case, this study explored whether the company’s overseas fab investment announcements trigger significant abnormal returns and risk changes in the short term. It also investigated whether such effects spill over to the Taiwanese market overall. Empirically, daily data of TSMC’s stock, the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX), and the 0050 ETF, December 7, 2015, to September 30, 2025, were studied as examples. The event window was defined as 20 consecutive trading days following each of the four overseas fab investment announcements: Nanjing, Arizona, Kumamoto, and Germany planning. Event dummy variables were used to measure post-announcement market reactions. This served to estimate the mean and variance equations, aiming to identify differentiated reactions in “return pricing” and “risk pricing.”
The main results show that market reactions exhibited significant location heterogeneity. The risk-reduction effect of the Japan fab investment event was the most consistent and statistically significant across most models. Regarding market spillover effects, the Japan fab investment event significantly reduced the conditional volatility of TAIEX and the 0050 ETF. This finding indicates that the market perceives this event as a signal enhancing supply chain resilience and strengthening overall confidence.
Keywords: TSMC, Market Spillover Effects, GARCH, Overseas Fab Investment
JEL Classification: G14, G32, F23