How TSMC became Buffett’s choice

Home > Opinion > Columns

print dictionary print

How TSMC became Buffett’s choice

Choi Ji-young

The author is the economic news editor at the JoongAng Ilbo.

When asked why he didn’t invest in technology stocks, Warren Buffett famously replied that he didn’t invest in companies he did not understand. The world’s foremost value investor used to say he was not good at evaluating high-tech business. When he decided to invest in TSMC, Taiwan’s foundry giant, the market was shocked. Berkshire Hathaway led by Buffett had made it official: The investment company in the third quarter bought $4.1 billion of TSMC shares listed on the New York Stock Exchange.

TSMC, the foundry powerhouse, has emerged as top global chipmaker after its sales surpassed Samsung Electronics’ in the third quarter.

Despite Buffett’s confession to a lack of knowledge about tech companies, his perspective drastically changed over the years. Currently, Apple’s stocks take up the largest share of Berkshire Hathaway’s investment portfolio.

Buffett is famous for his love for Apple. In an interview with CNBC in May, he said he bought more Apple stocks this year but would have bought even more if he could have afforded it. In 2021, Buffett praised Apple CEO Tim Cook for being an excellent leader. “Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well,” Buffett wrote in his annual letter to shareholders in February this year.

According to the Financial Times, Berkshire Hathaway is the largest shareholder of Apple as of the third quarter, with a whopping $126.5 billion investment in Apple, followed by $31.2 billion in Bank of America, $24.4 billion in Chevron, $22.4 billion in Coca Cola and $20.5 billion in American Express.

Market watchers say the share of tech stocks makes up nearly a half of Berkshire’s investment portfolio. Most of the tech stocks are from Apple, but they also include hardware companies like HP. Buffett also invested in IPO stocks of Snowflake, a cloud database company, while reducing the share of Activision Blizzard stocks in his portfolio in the third quarter.

Buffett sold IBM stocks, citing its challenges from competitors. In 2011, he bought Intel stocks and sold them the following year.
Berkshire Hathaway Chairman Warren Buffett walks through the exhibit hall as shareholders gather to hear from the billionaire investor at the investment company’s annual shareholder meeting in Omaha, Nebraska in 2019. [REUTERS/YONHAP]

Recently, TSMC has been added to Buffett’s remarkable tech portfolio. Market insiders expect the size of his TSMC stocks to rank in the Top 10 among all stocks owned by Berkshire Hathaway. Given a lack of massive investments in tech companies over the past six years — and the plunging price of TSMC shares by more than 40 percent this year — Buffett’s investment in TSMC carries great significance. Considering his uniquely cautious investment style, the decision represents his confidence in the future of the Taiwanese chipmaker.

Buffett has made the choice amid TSMC’s somewhat diluted geopolitical risks from China’s possible invasion of Taiwan. TSMC is to soon complete a chip factory in Arizona and start to manufacture cutting-edge 5 nanometer chips in the plant from 2024. Apple CEO Tim Cook promised to get chips from the Arizona plant.

U.S. President Joe Biden and TSMC founder Morris Chang will attend a glitzy ribbon-cutting ceremony at the Arizona factory scheduled in early December. TSMC will receive $50 billion incentives from the U.S. The Chips Plus Act is aimed at bolstering American semiconductor research, development and production to help stabilize chip supplies.

TSMC is accelerating localization of its chip production. On Nov. 9, the Wall Street Journal reported that TSMC will build additional production lines in Arizona by spending $12 billion, nearly the same amount as the cost for the ongoing construction of the factory currently under construction.

Samsung Electronics Chairman Lee Jae-yong pledged to let the company become the No. 1 global chipmaker, as he understands the limits of memory chips, which are vulnerable to capricious market cycles, and as he knows well the brighter future of non-memory chips. As a latecomer in the new market, Samsung achieved an enormous technological leap in such areas as the Gate-All-Around (GAA) fabrication process. But due to its comparative disadvantages in the stable supply of non-memory chips and a lack of customers, Samsung Electronics has to narrow the gap with TSMC as soon as possible.

Thanks to Buffett’s choice, TSMC can consolidate its position as the king of the non-memory sector. Samsung Electronics has to compete with TSMC now, based on its unrivaled competency to stably manufacture sophisticated chips — and widen the gap with its competitors once Samsung gains the upper hand.
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)