Warren Buffet Says Geopolitical Tensions A Factor In Decision To Dump Shares In Valuable Taiwanese Chip Firm
Warren Buffett said geopolitical tensions were a “consideration” in his decision at the end of 2022 to dump Berkshire Hathaway’s $4.1 billion in shares of TSMC, Taiwanese firm that supplies a majority of advanced semiconductors to tech companies, according to Nikkei Asia.
TSMC is widely viewed as Taiwan’s “silicon shield” against a potential Chinese invasion, as Beijing is also heavily dependent on semiconductors from Taiwan and a military assault could decimate the TSMC’s manufacturing facilities, according to CNN. Berkshire Hathaway purchased shares in TSMC between July and September 2022, according to Nikkei, as tensions between the U.S. and China reached a fever pitch in the weeks before and after former House Speaker Nancy Pelosi’s visit to Taipei in August, in an intended demonstration of democratic solidarity.
In an interview about plans to increase investment in leading Japanese trading firms, Buffett told Nikkei that he viewed TSMC as a well-managed company but that Berkshire Hathaway could better allocate its resources elsewhere.
Berkshire Hathaway disclosed in February that it sold 86% of its shares in TSMC near the end of 2022, according to Nikkei. The quick turnaround broke away from the 92-year old investment tycoon’s usual strategy of making longer-term bets.
TSMC reports its March revenues:
—Net revenue for March down 10.9% MoM and 15.5% YoY to NT$ 145.4B
—Q1 revenues up 3.6% YoY to NT$ 508.6B
Q1 earnings due on Thursday, April 20th$TSM: -1% PM https://t.co/8JqVk8lBzb pic.twitter.com/kidH6m1OpF
— The Transcript (@TheTranscript_) April 10, 2023
In addition, Buffett, not one of his portfolio managers, likely purchased the initial stocks himself, Reuters reported, according to CNN.
China staged its largest ever war games after Pelosi touched down in Taipei on August 2, roundly denouncing the visit as a violation of its sovereignty. Beijing views Taiwan, which has operated under an independent, democratic government for decades, as a breakaway province and pledged “reunification” by force if necessary.
U.S. intelligence assesses China will move on Taiwan within the coming decade.
Guarding TSMC is one reason politicians have advocated for coming to Taiwan’s aid if Beijing landed its military on the self-governing island’s shores, according to CNN.
Republican Rep. Michael McCaul defended his support for sending American troops to fight in Taiwan.
“The case for Taiwan, that’s a very good question, about 50% of international trade goes through the international straits, but I think more important is that TSMC manufactures 90% of the global supply of advanced semiconductor chips. If China invades and either owns or breaks up, we’re in a world of hurt globally,” he said in an interview on NBC’s Meet the Press Sunday.
However, the concept of deterrence — arming Taiwan and convincing China that an invasion would provoke an overwhelming response from the U.S. military — is the first priority in protecting Taiwan, McCaul said.
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