In a disclosure earlier this month, Warren Buffett’s Berkshire Hathaway revealed a multibillion-dollar purchase in Taiwanese chip maker TSMC, reports an article in The Wall Street Journal. Berkshire paid about $4.1 billion for 60 million shares, which puts the Taiwanese tech giant into the conglomerate’s top 10 holdings. Meanwhile, American depositary receipts of TSMC skyrocketed 11% in the wake of the news, the company’s best one-day gain in two years.
The influx comes after a major slump in the semiconductor industry, which has resulted cost-cutting, less output, and reduced spending because of the drop in demand; TSMC’s own ADRs are down 43% from a peak earlier this year. But many in the chip industry maintain a positive outlook, citing improvements in manufacturing capacity and government subsidies for facilities in the U.S. and Europe that have caused expectations for global sales to double over $1 trillion over the next 10 years. TSMC in particular is well positioned for growth, as they are an important chip provider for Apple—a company that Buffett has called “Berkshire’s second-most important business,” after its insurance holdings. And many analysts believe that chip stocks are close to their bottom; given TSMC’s reputation as a high-quality chip maker, and Buffett’s penchant for value investing, “the bet makes sense for Berkshire,” CFRA Research analyst Cathy Seifert told Bloomberg.
The investment could also benefit if tensions between the U.S. and China ease. TSMC is headquartered in Taiwan, which China has long claimed as part of its territory and threatened to occupy by force. The U.S. has responded to that threat by promising to defend Taiwan from Chinese forces. But President Biden recently met with Chinese leader Xi Jinping in an effort to strengthen relations between the two nations. Should that happen, the value of Berkshire’s bet is sure to grow. Meanwhile, TSMC has plans to expand its existing facilities in Japan, and construct more than one new plant in the U.S. and possibly Singapore, the article details.