War ‘consideration’ in Warren Buffett TSMC stake sale

Warren Buffett practically wrote the book on buy-and-hold investing, so when the Oracle of Omaha sells stock after just a few months, he must have good reason.

The 92-year-old CEO of Berkshire Hathaway said he dumped the bulk of his $4.1 billion stake in Taiwan Semiconductor Manufacturing Co. (TSMC) within the space of one financial quarter last year in part owing to the risk of war in the island nation. 

Rising geopolitical tensions were “a consideration,” he said in an interview with Nikkei on Tuesday, arguing that he had better places to invest his firm’s capital even if the world’s largest chipmaker by volume is a well-managed company.

China has been rattling its saber of late, deploying its People’s Liberation Army last week to conduct a joint force live-fire training exercise simulating military strikes on Taiwan, which it considers part of the country.

Defense experts fear that with the demise of an older generation of Taiwanese born in mainland China, the time window for Beijing to reunify peacefully is dwindling amid a nascent national identity particularly among the island’s pro-independence youth. 

Meanwhile if China’s Xi Jinping wants to invade, it’s unclear who would stop him. The ruler fully consolidated his power base in October after eliminating all rivals from the standing committee of the Politburo, the country’s top policy-setting body, and securing reelection as president to an unprecedented third term last month. 

International tempers were further inflamed this week after French President Emmanuel Macron gave what some critics are calling an invitation to Beijing to invade Taiwan, the world’s sole provider of bleeding-edge microchips, saying deterring Chinese aggression was not in his view a core strategic interest for Europe.

Only last Wednesday, U.S. House Speaker Kevin McCarthy, third in line to the presidency, lit a fuse guaranteed to anger Beijing after becoming the highest-ranking U.S. official to host the president of Taiwan on American soil since diplomatic ties with China were established. 

Given that the U.S. is dependent on silicon logic circuits from TSMC, any invasion would have enormous repercussions on supply chains that would make the 2021 semiconductor shortage look like a minor hiccup.

“A single missile strike on TSMC’s most advanced chip fabrication facility could easily cause hundreds of billions of dollars of damage [to the global economy] once delays to the production of phones, data centers, autos, telecom networks, and other technology are added up,” wrote author Chris Miller in Chip War, the FT’s Business Book of the Year for 2022. 

With Taiwanese elections scheduled for January and incumbent Tsai Ing-wen no longer able to run, the billionaire founder and ex-CEO of Foxconn, Terry Gou, announced his intention last week to run for the highest office in order to avoid war with its cross-strait neighbor. 

Gou remains the largest shareholder of the Apple iPhone manufacturer, which is dependent on China for roughly 70% of its revenue. He plans to run on a pro-Beijing, anti-independence platform, urging his fellow Taiwanese that “we can’t let our children live in a forest of guns and the hail of bullets.”

Meanwhile the Pentagon’s top brass already anticipate an invasion of Taiwan by the PLA could draw America into a war with China.

“My gut tells me [we] will fight in 2025,” wrote U.S. four-star general Mike Minihan in a memo obtained by NBC News in January.

It’s no wonder then that Buffett’s gut instinct told him to cut his risks while he still can and offload the bulk of his stake in TSMC. 


No votes yet.
Please wait...

Leave a Reply

Your email address will not be published. Required fields are marked *