Why Buffett Invests $5 Billion In Taiwanese Chipmaker TSMC Code List

Warren Buffett throws a golden lifeline to TSMC, the maker of the world’s most advanced chips. Photo: JOHANNES EISELE/AFP via Getty Images.

  • TSM produces semiconductors for Nvidia, Qualcomm and Apple

  • Overtook Intel as the most advanced chipmaker

  • It is Buffett’s first investment in the semiconductor industry.

Warren Buffett’s Berkshire Hathaway has acquired a more than $5 billion stake in Taiwan Semiconductor Manufacturing, a company that produces semiconductors for Nvidia and Qualcomm and is the exclusive supplier of Apple’s silicon chips.

Everything indicates that the “oracle of Omaha” believed that the Taiwanese manufacturer had bottomed out after a liquidation of more than US $ 250,000 million. By Tuesday, after the purchase was disclosed, TSMC shares were up more than 9.4%, their biggest intraday gain in more than two years, a Bloomberg report indicates.

In a filing with the US Securities and Exchange Commission on Monday, Berkshire Hathaway said it had acquired about 60 million American depository shares (ADRs) of TSMC in the past three months through September.

“TSMC welcomes all investors who are willing to buy and hold shares,” CNN Business quoted a spokesman for the chipmaker as saying.

The Taiwanese company designs around 90% of the world’s most advanced chips and supplies tech giants like Apple with the most valuable single stake in Berkshire’s portfolio.

tensions with china

The US conglomerate’s move comes as tensions rise between China and the autonomous island, which has faced increasing military aggression in recent months. Therefore, Taiwan’s role in the global chip manufacturing industry has become a serious topic of conversation.

The semiconductor chips produced by TSMC are difficult to manufacture due to the high cost of development and the level of knowledge required, which means that much of the production is concentrated at a handful of suppliers. The company is so important to the island that its employees can request not to participate in the reserve’s military training.

Tensions between Washington and Beijing have also been rising lately over the tokens. During his meeting in Bali for the G20 leaders’ summit, Joe Biden said he has not changed his one-China policy, but reiterated that he opposes “any unilateral change of the status quo” by either party. .

Biden also imposed a broad set of controls on Chinese companies on the sale of advanced chips and their manufacturing equipment, specifically to prevent them from reaching the hands of the Chinese military. Some experts fear that this will push the technological arms race between the two world powers to an unprecedented level.

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Xi warned that Taiwan is “the first red line not to be crossed” and said he hoped the United States would not support the island’s eventual independence. Photo: Getty Images

On Tuesday, Taiwan thanked the US president for reiterating his “support and commitment” to the island, which China claims as its own, while Xi warned that Taiwan is “the first red line that must not be crossed” and said he hoped the United States The United States will not support eventual independence for the island.

“Anyone who seeks to separate Taiwan from China will be violating China’s fundamental interests, and the Chinese people will never allow it. We hope to see peace and stability in the Taiwan Strait, but peace and Taiwan’s ‘independence’ are irreconcilable,” Xi said.

Why did Warren Buffett’s stance change?

The 92-year-old entrepreneur long ago walked away from the tech industry, arguing that he didn’t want to invest in businesses he didn’t fully understand. But in recent years he has devoted an increasing proportion of his company’s investments to the technology sector.

Chip manufacturing promises sustained growth for the coming yearsas it is essential for the expansion of emerging industries such as cyber defense, electric and autonomous cars, artificial intelligence and smart home applications.

Robert Schiffman, a Bloomberg analyst, spoke of “an outperformance by 2023” as investors weigh the potential for a recession. “Tight spreads and limited downgrades support the strength of the sector,” he said.

TSMC, which replaced Intel Corp as the most advanced maker of next-generation chips, has also become “a strategically vital player at a time when the US and China have clashed for leadership in the global technology industry.” ”. Schiffmann said.

Shares of TSMC in Taiwan had fallen 28% at the close on Monday as demand for chips slowed in the economic downturn and investors worried about excess supply.

In October, the company made it known that it had reduced capital spending to about $36 billion, from a previously planned $40 billion.

Jordan Klein, an analyst at Mizuho financial group, wrote on Tuesday that the investment was Buffett’s first in semiconductors in the course of his career “so it does matter” and that TSMC is “at its best for quality.”

He also opined, quoted by MarketWatch, that TSMC’s 2023 estimates for Wall Street “still seem too high” while “the risk of invasion from China is not necessarily zero.”

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