Warren Buffett’s Berkshire Hathaway Acquires $4.4 billion Stake In Taiwanese Chipmaker TSMC

Warren Buffet's Berkshire Hathaway Inc has disclosed that it has purchased more than $4.4 billion of stock in TSMC (Taiwan Semiconductor Manufacturing Company Limited), the world's largest contract chip manufacturer that pioneered the pure-play foundry business model.

In a regulatory filing to U.S authorities, Berkshire said that it owns about 60.1 million American depositary shares of the semiconductor chip manufacturer(estimated to be worth nearly $4.4 billion based on Monday's closing price.)

The investment in TSMC is significant, considering that billionaire Buffet usually avoids foraying into the technology sector.

When asked once why he didn't invest in technology stocks, Buffett famously quipped that he didn't invest in companies he didn't understand. Buffet has since admitted shunning the technology sector might have been a mistake and has taken significant positions in tech behemoths, including Amazon and Apple.

As the world's largest and most sophisticated contract chipmaker, TSMC produces the smallest, densest, and most power-efficient chips for fabless chipmakers like Advanced Micro Devices, Qualcomm, Nvidia, and Apple. The company's dominant position in 7nm and 5nm nodes gives its pricing power currently unmatched by rivals Samsung and Intel.

TSMC is Apple's exclusive provider of the most advanced chips inside every iPhone on the market and most Mac computers.

In 2020, TSMC made a revenue of $48.29 billion, an increase of 31.4 per cent over 2019, which stood at $38.58 billion. The company's sales soared in 2020, driven by new 5G devices, robust sales of PCs during the pandemic, and a growing appetite for more powerful data centre chips.

TSMC'S strong performance in 2021 was driven by solid demand for its advanced 5-nanometer process, the latest technology the chipmaker has begun to mass-produce. The continued demand from top clients, including Apple and Qualcomm, for semiconductors boosted the company's sales to a record level.

Though the semiconductor industry has now entered an inventory correction cycle, TSMC has made big gains in revenue in 2022. Its revenue for January through October 2022 is just over $59 billion, an increase of 44 per cent compared to the same period in 2021.

In October, TSMC announced that it was slashing its proposed capital expenditure by up to 18 per cent this year as tepid demand for smartphones and PCs curtailed demand for its 7-nanometer chips and lowered capacity utilization.

In July, TSMC announced that it would be spending between $40 billion and $44 billion this year on new fab facilities and equipment. But it has now downscaled the spending plan to $36 billion.

In April 2021, TSMC announced plans to invest $100 billion over the next three years to increase production capacity to meet surging demand.