Berkshire Hathaway bought a $4.1B stake in Apple chipmaker TSMC | Hacker News Reader

Berkshire Hathaway bought a $4.1B stake in Apple chipmaker TSMC

9to5mac.com

130 pointsmikece72 comments

I suppose it's an Apple news site, but calling them "Apple chipmaker" is a heavy understatement of how ubiquitous TSMC's chips are. Even without Apple involved TSMC would have its foundries running at full capacity to meet demand. Ignoring geopolitical concerns, TSMC is much more of a "boring" manufacturing company than a tech company. So it's not surprising that Berkshire would invest in it.

People also routinely call Foxconn ”the iPhone factory”, especially if something bad happens there

jesus christ calling TSMC an "Apple chipmaker", tactless.

I would call Berkshire an “Apple stockholder” since the only reason they have kept up with the market over the last 10+ years is because of their Apple holdings.

Why didn’t the other investments pan out?

Buffett missed out on massive tech company returns because he was opposed to investing in businesses he did not understand, and he did not understand tech companies.

https://www.theguardian.com/technology/2016/may/16/warren-bu...

>Asked why he had bought IBM shares rather than Apple or Google at Berkshire Hathaway’s 2012 shareholder meeting, Buffett said: “The chances of being way wrong in IBM are probably less, at least for us, than the chances of being way wrong in Google or Apple ... I just don’t know how to value them.

>“I would not be at all surprised to see them be worth a lot more money 10 years from now but I would not buy either one of them. I sure as hell wouldn’t short them either.”

And then Buffett made some bad bets on Kraft Heinz (3G was a poor partner to invest with, actually was a surprising move since 3G already had a poor reputation) and IBM, but I think it was mostly missing out on Facebook/Google/Microsoft/Apple/Amazon/Netflix/etc growth.

https://www.reuters.com/article/us-berkshire-buffett-kraft-h...

How did he not buy Apple and end up with Apple being 40% of Berkshire?

He did relent and buy Apple in 2016. The quoted portion is from the 2012 shareholder meeting.

Also, by what measure is AAPL 40% of BRK?

I went off of this: https://www.cnbc.com/berkshire-hathaway-portfolio/ but it may be outdated.

Either way it's 5% of APPL, which means Apple is HUGE.

I assume that is only a list of the publicly listed shares BRK owns, since it totals to $345B and the market cap of BRK is ~$680B. They must have other assets for such a huge pricing discrepancy.

Yes. The stock portfolio is only a fraction of BRK. They own an entire railroad (BNSF), a very large electricity utility, GEICO and other insurance firms, and dozens of other entities - many would be Fortune 500 firms on their own.

> Buffett missed out on massive tech company returns because he was opposed to investing in businesses he did not understand, and he did not understand tech companies.

He also missed out on massive tech company losses.

BRK has clobbered the index on a 1 and 2 year basis, and beaten it on a 5 year basis. I'll wager a good sum that as interest rates continue to be nonzero, they will continue to massively outperform.

There is no shame in a market performance when zero interest rates have caused people to chase crypto, GME, and other money-losing businesses. People are in the process of finding out how, say, AMC or TSLA will do when there is a actual cost of money.

(edit: spelling)

To be fair...

Apple's their largest customer by about a factor of 5, makes up about a quarter of TSMC's revenue, and probably bought more than half of TSMC's 5nm wafer production last year.

Definitely Apple makes up a massive part of TSMC’s profit, and whoever replaced them would likely not be willing to pay as much for the privilege. The crazy thing though is that TSMC has a net profit margin of about 41% (and this isn’t a fluke, it hasn’t been below 30% in the last 10 years). Even if they lost Apple and left the foundries empty during their slots, they would still be profitable.

Is there somewhere were I can see the breakdown of their largest customers? I would be curious to see the TSMC customers that trail Apple and by how much.

I would imagine nvidia and AMD are pretty high up there as well.

Digitimes estimates put mediatek in second place.

https://www.digitimes.com.tw/tech/dt/n/shwnws.asp?cnlid=1&id...

Hard to imagine a bigger "moat" than SOTA chip fabs. Surprised it took Buffett this long to move into the space.

It’s only a moat up until you fall behind. Intel had that moat once too

Most people don't know TSMC or what they do or how chips get made or any of it. It's just to put it in context for a good chunk of the readers.

Put another way - you aren't the audience they have in mind when writing that headline.

I’m not a native speaker, but for me it sounds valid to call the company that produces the majority of Apple chips: Apple’s chipmaker.

It doesn’t exclude that they produce for other companies, but it concludes that Apple gets most of it’s chips from them. Right?

I think the objection is about a functionalist perspective. Is it more accurate to call TSMC a chip manufacturer, or an Apple chip manufacturer?

If I happen to be the person who buy's the most Starbucks at my local cafe, does that make it my cafe? Is the core function of the cafe to make coffee or to make coffee for me?

Is the core function of TSMC to serve Apple's needs or to make chips? Do you see the difference?

If you were a famous person who only bought their coffee at that one place, and bought more coffee than (nearly) everyone else put together -- then yeah, I would definitely call that place "cjt's coffee place"

But the ambiguity is still there. If Gordon Ramsey loves a certain sushi restaurant and is the only one he eats at, calling it Gordon's sushi restaurant would be very confusing since it could realistically be either (or both) of the interpretations.

The same can be said for Apple, which prides itself for how vertically integrated they are

Continuing the restaurant metaphor, there is a big difference between Apple's and TSMC's relationship and a celebrity and a restaurant. The celebrity might tweak the menu a bit but it is the chef (and their cooks) which decides on how to cook it. Meanwhile, the Apple-TSMC relation is more integrated: in food analogy Apple also gets to decide what equipment they use, where to source their ingredients and shares some of their secret recipes.

Apple may be their biggest customer but at the end of the day they are still a customer. If TSMC wanted to, or had to, drop Apple as a customer they can. And they can only do this since TSMC isn't Apple's.

Does it have to be the person who buys the most?

“My company is having layoffs”. People would know that I don’t own my company.

Those aren't the same parts of speech though. The subject-object relationship is different.

If you're talking from the perspective of who make Apple's chips, yeah. This is an article about an investment Berkshire made though, and spent most of its time talking about his investment history with Apple and sort of...is structured in a way that says they view this investment as a doubling down on their Apple investment and not a investment that stands apart on its own terms. My issue with the phrase is less its use in a vacuum, and more the article as a whole in a way that is boiled down to how they only describe TSMC as Apple's chipmaker.

Yes, and on an Apple news site that makes sense.

However, in a more general (not Apple-focused) context it might be more appropriate to start with what the company does (chip foundry/fab) and if needed then note their most important customers (Apple, AMD, NVidia).

It literally confused me when I read Apple chipmaker. I thought for a moment, did Apple buy TSMC?

I get that this article is on 9to5mac, but can they lay off the Apple references for just a breath?

> Apple chipmaker TSMC

> [three paragraphs of background on Buffet's opinion of Apple]

> first time Berkshire has bought stock in Apple’s chipmaker

> stake in Apple chipmaker TSMC

> Samsung has recently been upping its efforts to catch up in order to win back Apple business, and TSMC’s Apple revenue could potentially be cut in half if that happened.

> Both TSMC and Samsung are also working on US production of advanced chips suitable for Apple devices, something which the Cupertino company is likely to welcome.

Apple is TSMC's largest single customer, but they're only ~25% of their revenue. Is this an article about Berkshire Hathaway, TSMC, or Apple?

> Apple is TSMC's largest single customer, but they're only ~25% of their revenue.

Consider that Apple is also 25% of total assets of Berkshire (around 250$B), so it's not much of a surprise that Berkshire is going into the main manufacturer of the biggest stock they have - hence the strong linking between the wto.

Considering that they have slightly less than a billion shares as of May 2022, I don't think that number is correct.

https://www.cnbc.com/berkshire-hathaway-portfolio/

~915.2M AAPL shares as of Sep 30, 2022, so ~$140B worth (20% of BRK’s market cap).

For comparison, BRK market cap is ~$687B and AAPL market cap is $2.4T.

https://companiesmarketcap.com/

Makes you wonder if the Sage of Omaha is encouraging Apple to become a Samsung with both horizontal and vertical integration.

Very interesting. Maybe Buffett isn't too concerned about the geopolitical risks to TSMC? There's been tons of chatter about China militarily reunifying with Taiwan by 2027 but I'm guessing Buffett thinks it's all hot air? Because if China does invade Taiwan, then TSMC would be the first to suffer.

I'd think the CCP would be wary about killing the golden goose with TSMC. Plus there is currently a very prominent example of why attempting to annex neighbors is not a good idea in the modern world. Ruin to economy, reputation, world standing, and even military prestige are all possible. Absolute embarrassment.

Most people that don't have the golden goose, don't care about killing it.

If your enemy has a golden goose and you don't, there isn't much stopping you from killing it.

About 70% of the chips that China’s extremely lucrative electronics industry uses come from TSMC though. They might not have the golden goose that is TSMC, but one of their own golden geese relies on it to keep running.

Yeah, except for recent legal changes are making that number go down.

Yes, but if you know that you can probably steal the enemy's golden goose if you tried hard enough, I would think you wouldn't kill it outright.

CCP is better off keeping the world's best chip fab in a region they claim to be their territory.

Didn't stop them with Alibaba. Have you seen the Chinese stock market performance this year?

The ccp is playing the long game. I don't think they really care about short term economic loses. I mean look at what the did with hk.invading a island is hard and they probably need to worry about America. Otherwise Taiwan is probably in trouble.

> The ccp is playing the long game.

It's more of a medium game. A dictatorship can plan 5-10 years out. But they can't exist indefinitely. By design, there is no succession plan.

Handing off the country to your child is a time honored succession plan for highly authoritarian regimes. From Kings to Kims the only successor you can trust is your own blood, especially if you've set the country up as a cult with your family as deities.

China's goal is to become self sufficient, but it'll take time. SMIC did ship 7nm chips faster than expected however.

I don't think having your reputation, world standing or military prestige be ruined is a deterrent. Countries that are oil exporters are raking in the money and are able to pursuit their geopolitical goals. Now is probably one of the best times to do it considering the greater global turmoil and energy crisis. Take a look at Russia & Azerbaijan, more will come.

TSMC is building a huge fab here in America. It's a couple/few years out, but that would do a lot to alleviate this risk. And it could be rushed if it were prioritized as an American National Security Project.

https://topics.amcham.com.tw/2022/08/tsmc-prepares-american-...

s/elevate/alleviate

i think.

Engrish is my first language....

I'm confused: do you think China would be more likely to take Taiwan if it saw that nexus of economic leverage starting to diffuse?

No. I think the CCP wants Taiwan indifferent of it being an economic powerhouse, or a broken 3rd world island. Failure to integrate Taiwan has been a stain on the CCP system, and it's not a system that can afford any stains.

All I'm pointing out is should Taiwan be invaded, TSMC stands to be in a position to receive a significant infusion of government cash to bring that fab online ASAP. And once that FAB is completed the systemic risk of China to TSMC evaporates, and at that point I believe that TSMC goes to the moon.

The fab TSMC is building in America is such a small amount of their volume as to make almost no difference. And it won’t even be a leading node by the time it’s built.

You can still get a lot done with a 5,7,10,14,etc nm node.

I don't know whether he's concerned or not, but you don't get high stocks returns without taking on risk.

> Maybe Buffett isn't too concerned about the geopolitical risks to TSMC?

My first thought. I wonder if this makes any action by CCP less or more likely, as well as the possible intervention by the US??

If all the chip fabs in Taiwan are wiped out, the remaining fabs in the rest of the world are going to be insanely profitable, right?

If this happens within the next two years, it is probably devastating for TSMC and a bad investment by Buffett. After two years, ???

The 2027 date is not actually real:

https://twitter.com/MikeBlack114/status/1571401031539367939

Does anyone else find it bewildering that a conservative investor like Warren Buffet makes a bet like this? I mean, if China invades, it's gone. This kind of uncertainty is the type of thing he always warns against.

It's $4 billion. Berkshire is $700 billion market cap.

And, while he runs Berkshire conservatively overall, some individual bets he makes are very risky. He risks billions betting on the weather.

He's also a trillion years old and 40% of what he owns is already APPL anyway. Only VANGUARD owns more of Apple than he does.

I think Buffet moves in high end financial and political circles so he probably sees what we don't see. Actually, what I'm thinking is, if China does invade Taiwan, China will make double sure that it does not spur the financial interest group too much, so it will almost surely guarantee the safety of the investment.

Maybe the analysis shows that TMSC has - to the degree possible in tech - a moat? The EUV tech is not easy to scale up so whoever is ruling the field right now has a decent chance to outdistance rivals for quite some time.

Going by the numbers, TSM is trading at <15 Trailing P/E with a 47% YoY growth. It's a very good buy if you discount the invasion risk. Seems like Buffet sees the implied risk as overblown.

I have been investing in an Emerging Market fund and TSMC is now the biggest position there. Used to be Alibaba and Tencent. Good to invest along with Buffet:)

We are almost bottom in the market then...

It’s all about the moat, like Buffet always says. And TSMC sure has a solid one.

"Apple chipmaker"?

The mother of all Berkshire Hathaway subreddits: r/brkb

Is it 1/1500'th of r/brka but with 1/10k'th the vote?

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