Warren Buffett Sells Stake in Taiwan Chipmaker

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Facts

  • According to a Monday filing, American business magnate Warren Buffett’s conglomerate, Berkshire Hathaway, has sold all its shares in Taiwan Semiconductor Manufacturing Company (TSMC) over worries about Taiwan's "uncertain" future.1
  • Buffett made his decision after reassessing the risks involved in Taiwanese production. While the company produces some of its chips in other countries, the majority of its production of competitive products happens domestically.2
  • TSMC, the world’s largest chip manufacturer, produces the most advanced semiconductors in the world and is one of the world’s most valuable listed companies, with a market capitalization of $415.3B as of Tuesday.3
  • Last November, Berkshire Hathaway purchased 60M American depository receipts in TSMC, worth $4.1B, but revealed the next quarter that it had sold 86% of its stake. Buffett later shared that geopolitical tensions in the region were a "consideration" in the decision.4
  • Buffet said, “I don’t like its [TSMC's] location, and I’ve reevaluated that. I feel better about the capital that we’ve got deployed in Japan than in Taiwan.”3
  • Tensions over the democratically governed island have risen in recent months as China continues to claim Taiwan as part of its territory – an idea Taiwan rejects.5

Sources: 19to5Mac, 2Bloomberg, 3CNN, 4Fortune, and 5Reuters.

Narratives

  • Narrative A, as provided by Quartz. Based on the geopolitical conditions between China and Taiwan, this is the right move by Buffett. A survey showed that half of US firms in Taiwan expect their business to be disrupted by Chinese military operations, and many companies are adding “risk clauses” to their contracts in Taiwan to protect against a flare-up between the island and the mainland.
  • Narrative B, as provided by South China Morning Post. Buffett is best known for his success in investing, but his decision to pull out is premature. TSMC continues to have a stranglehold on the semiconductor industry, with many companies depending on its technology, despite the current geopolitical tensions. While he's right to be concerned, this is one decision he may come to regret. Other investors would be wise to take advantage of TSMC’s projected success.

Predictions