The Taiwan Semiconductor Manufacturing Company (TSMC), which has grown spectacularly over the past couple of years to become the world’s most advanced chip manufacturing company, saw a bit of tough love from Warren Buffet last quarter. Mr. Buffett’s financial firm Berkshire Hathaway made headlines last year when its filings with the Securities and Exchange Commission (SEC) revealed that the firm had bought a $4.1 billion stake in TSMC. However, perhaps a turbulent near-term future for the semiconductor industry caused some buyer’s remorse, as Berkshire’s latest SEC filings show that the fund has sold nearly all of its TSMC investments now, which currently stand at $617 million for a stunning drop.
Warren Buffett Cuts TSMC Stake By 82% In the Fourth Quarter
2022 was a challenging year for TSMC, but despite this, the firm managed to post $19.9 billion in revenue but struggled with the stronger U.S. dollar since its NT$ earnings grew by 42% annually, but in USD terms, they grew by 26.7%. The earnings presentation revealed that Q4 2022 shifted the firm’s product mix, leading to high performance computing (HPC) products accounting for the bulk of the revenues. HPC contributed 42% to the revenue pie, growing from the 37% contribution that it had marked during the previous year.
Crucially though, TSMC’s chief Dr. C.C. Wei warned that non-memory foundry revenue would drop this year, as the industry digests the inventory shipped during a high order cycle in the wake of the coronavirus pandemic. Dr. Wei’s company is mass-producing semiconductors on the 3-nanometer manufacturing process, the most advanced chipmaking technology in the world.
Warren Buffett’s Berkshire Hathaway created ripples in the industry last year when it was revealed that it had scooped up $4.1 billion of TSMC shares at a time when the stock was taking a beating on the market. However, for TSMC supporters, this victory appears to be short-lived, as Berkshire’s latest SEC filings show that it has cut its stake in TSMC by a whopping 82%.
Berkshire Hathaway’s latest SEC filings show that its stake in TSMC is one of the lowest in the investment portfolio. Image: SEC EDGAR
The latest filings reveal that Mr. Buffett’s famed investment firm now cumulatively owns approximately 8.2 million TSMC shares for a $618 million stake. This marks a stunning 82% drop over its holdings during 2022’s third quarter. Scanning the entire investment portfolio reveals that in percentage terms, the TSMC stake marked the second biggest reduction and one of five companies that saw Berkshire reduce its holdings in double digits.
The filing comes as Wall Street paints a darkening picture of TSMC’s fate this year. Analysts of JPMorgan, UBS, Goldman Sachs and Citigroup believe that during the first half of this year, TSMC’s revenue will continue to drop and only recover once it starts shipping 3-nanometer products. This dour outlook blames various factors for the poor financial performance, including a low capacity utilization that an order drop will spur. However, the banks believe that 2024 might see the firm grow its operating revenue by as much as 24%, even as the revenue remains flat this year.
Wall Street analysts are joined by their Taiwanese counterparts, with a report that surfaced last year claiming that TSMC’s customers find it difficult to determine the demand for the HPC products. However, one major TSMC customer, the Santa Clara, California-based semiconductor designer Advanced Micro Devices, Inc (AMD) can scoop up as much as 30% of the highly lucrative data center market, according to a KeyBanc report. AMD, which beat analyst estimates in its latest earnings, cautioned that it will under ship inventory to help clear the glut.
The post TSMC Dumped By Warren Buffett As Investment Slashed By ~$3.5 Billion by Ramish Zafar appeared first on Wccftech.
