Responses in Semi Industry to Impact from Changes in Money Supply and Expectations: Focusing on Pass-through

This research is performed to deliver managerial implications to the stakeholders in semiconductor industry. I performed this research, trying to answer the questions asking whether any exogenous impacts from preceding variables affect following variables in semiconductor industry. To answer the questions, I estimated ‘pass-through’ using accumulated impulse response functions and ‘explanatory power’ of impact-causing variables to changes in semiconductor shipment through variance decomposition in SVAR system which is employing M1/M2, PMIs of both the U.S. and China and global semiconductor shipment as variables. According to the analysis result, estimates of pass-through generally show positive signs, i.e., the increase in money supply or positive expectations for future economy causes the increase in semiconductor shipment. However some negative estimates are also found from certain paths. One probable explanation is that the increase in money supply can be warning signal to purchasing managers and the stakeholders in semiconductor industry for preparation of upcoming downturns. Positive-signed pass-throughs are found on the paths of ‘manufacturing PMI to semiconductor via production PMI’ and ‘M1 to semiconductor via PMIs’ using variables as in the U.S.; and on the paths of ‘M1 to semiconductor via M2’, ‘M1 to semiconductor via PMIs’ and ‘manufacturing PMI to semiconductor via production PMI’ as in China. During the analysis, one of the distinguished findings is that money supply in China shows large explanatory power to semiconductor shipment, which can be explained by China's current portion and position in world semiconductor industry.