Buffett bets US$5b on chipmaking with new stake in TSMC

WARREN Buffett’s Berkshire Hathaway took a stake of about US$5 billion in Taiwan Semiconductor Manufacturing (TSMC), disclosing its holding in the world’s leading chipmaker as part of its portfolio changes in the last quarter.

The Omaha-based conglomerate acquired about 60 million American depository receipts (ADRs) in TSMC in the three months that ended in September, it said in a filing. The Taiwanese company produces semiconductors for clients like Nvidia and Qualcomm and is the exclusive supplier of Apple’s custom Silicon chips. Apple remains the most valuable single holding in Berkshire’s portfolio.

Assuming Buffett bought TSMC’s ADRs at the average price for the third quarter, the stake would have cost him US$5.1 billion. They currently trade at US$72.80.

The 92-year-old Buffett long shied away from the tech industry, making the case that he didn’t want to invest in businesses that he didn’t fully understand. That stance changed in recent years, however, and he has dedicated an increasing proportion of his company’s investments to the tech sector.

Chipmaking is one segment that promises sustained growth over the coming years as it is essential to the expansion of nascent industries like self-driving and electric cars (EVs), artificial intelligence (AI) and connected home applications. Expansion of cloud services like Amazon.com’s AWS also promises to bring in more orders for silicon that goes into vast data centres.

TSMC, which has taken over from Intel as the firm advancing the cutting edge of chipmaking, has also emerged as a strategically vital player at a time when the US and China have clashed over leadership in the global technology industry. Taiwan’s most valuable company has the manufacturing prowess to make the world’s most advanced chips, instrumental to advancing every nation’s future commercial industries like EVs and AI but also feeding their military and cyber defence ambitions. The US has imposed elevated sanctions on high-end chips produced for Chinese customers specifically to forestall them making their way into the hands of the Chinese military.

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TSMC shares at home in Taiwan have dropped 28 per cent this year through Monday’s (Nov 14) close, as demand for chips has slowed with the economic downturn and investors fretting about oversupply. The company said in October it pulled back on capital spending to about US$36 billion this year, which would still be a record high, down from at least US$40 billion planned previously. BLOOMBERG