[Chip Talk] Selling TSMC, Buying More Apple... Why Is Buffett's 'Short-Term Trading'?

Buffett, Focused on Long-Term Investment, Sells TSMC Shares Just 3 Months After Purchase
Speculation Arises Over Apple’s Own Semiconductor Production Amid Unclear Reasons for Sale

[Asia Economy Reporter Baek Jong-min] The ripple caused by investment master Warren Buffett, chairman of Berkshire Hathaway, in the world's largest foundry (semiconductor contract manufacturing) company TSMC is far from trivial. Buffett, known for long-term investments, selling a significant portion of TSMC shares after just one quarter may not be a simple matter. Some analysts interpret it as a signal of a long-term restructuring in the semiconductor market. There is even a scenario where Apple could exclude TSMC and produce semiconductors designed in-house. After Buffett’s stock sale became known, TSMC’s stock price plunged by 5%, which is believed to reflect such concerns.

On the 14th (local time), Berkshire disclosed in its Q4 year-end stock holdings submitted to the U.S. Securities and Exchange Commission (SEC) that it sold 51.77 million shares of TSMC, accounting for 86% of its TSMC holdings, worth $3.9 billion. Since Berkshire acquired TSMC shares in Q3 last year, it held them for only about three months before starting to liquidate. TSMC’s stake in Berkshire’s portfolio quickly rose to 1.7% (ranked 9th), but now it has dropped to 0.2%, falling out of the top 30. Meanwhile, Berkshire increased its Apple holdings. Apple’s share in the overall portfolio surged to 41.4%. While Cathie Wood’s fund focused heavily on Tesla, Buffett appears to be ‘all-in’ on Apple.

Buffett has historically been reluctant to buy IT-related stocks. Even so, it is hard to understand why the long-term investor Buffett would change his stance within just three months. Without Buffett’s direct explanation, only speculation abounds. Some suggest that the foundry industry’s large-scale investment activities might have negatively impacted earnings, influencing his decision.

There is another perspective. Investment information media ‘The Motley Fool’ diagnosed that Buffett might have reacted to rumors that Apple could produce semiconductors on its own. Apple accounts for 25% of TSMC’s total revenue as its largest customer. After TSMC took over production of the iPhone A-series semiconductors, previously entrusted to Samsung, it rose to become the overwhelming number one foundry. If Apple produces semiconductors directly, profitability would increase further. Recent reports that Apple will manufacture displays for the Apple Watch directly are in the same context.

If Apple evolves into a comprehensive semiconductor company that manufactures semiconductors directly beyond design, TSMC’s revenue loss is inevitable. Industry insiders also suggest that complaints about TSMC raising wafer prices amid semiconductor shortages may have provoked Apple. Rather than taking direct action, Apple might be trying to pressure TSMC through rumors to lower supply costs. Recently, Apple has requested TSMC to reduce semiconductor production for Apple. Smartphone-specialized media PhoneArena reported that Apple asked TSMC to cut wafer production by 120,000 units, including the recently launched 3nm process.

Although Apple is actively expanding self-designed semiconductors, producing semiconductors directly is not easy. It may be an even more difficult challenge than semiconductor design. First, installing a fab for the latest semiconductor processes requires tens of trillions of won in investment and the ‘super subcontractor’ ASML extreme ultraviolet (EUV) equipment, which is essential. Without this equipment, semiconductor production is impossible. Securing its own fab also conflicts with the philosophy of Apple CEO Tim Cook, who has focused on outsourcing production.