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Comment by arbuge | Hacker News Reader

The TSMC move was notable because they ditched most of their holdings. One theory is that they did so because of concern over geopolitical risk, given TSMC's primary location. However that was arguably present to the same extent or more when they made the investment recently also, so this is not clear. It is out of character for them to jump in and out of investments quickly in this manner.

The AAPL move was miniscule in comparison and hardly worthy of note.

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The Register had a direct quote from Charlie Munger on this question.

...Munger isn't keen on semiconductors because they're too capital intensive.

"The semiconductor industry is a very peculiar industry: you have to take all the money you've made and with each new generation of chips you throw in all the money you previously made, so it's compulsory investment of everything … to stay in the game," he said.

"Naturally I hate a business like that. At Berkshire we like a whole lot of surplus money to come in that we can do something else with."

Asked about Taiwan Semiconductor Manufacturing Company Limited (TSMC) – which just delivered Berkshire Hathaway a fast and tidy profit – Munger said he thinks the company "may be a good buy at these prices."

https://www.theregister.com/2023/02/16/charlie_mumger_slams_...

Berkshire holding AAPL and/or TSMC is kinda against what Berkshire does anyway, it's the index-fundification.

Their real value is when they can buy a successful company and provide effectively zero percent debt for that company to thrive. And that trick has been hard to differentiate on for the last dozen years with interest rates so low.

So perhaps they're getting the warchest full again and the band back together.

How is holding AAPL against what they do when it's literally their biggest position

And most of the reason they are not lagging SP500.

This is why they're holding it, but it's also part of how BH is just becoming an index fund.

Originally they would invest in high-value companies that they could grow steadily by supplying them with cheap cash. That's not AAPL.

Could be based on an update to their risk model. Apple and TSMC are relatively closely tied together so having both TSMC and Apple increases risk concentration for example if TSMC butchers a node release Apple will suffer for at least a year or two. Berkshire probably decided they were no longer comfortable with the risk concentration of having both.

TSMC is making a lot of investments that won't see ROI anytime soon. Couple that with geopolitical risks and you can see how while buying might not be a bad idea, holding for short term gains would be very risky.

> One theory is that they did so because of concern over geopolitical risk

That isn’t a logical reason at all. TSMC’s risks and Apple’s risks are directly correlated and Apple is Berkshire’s largest holding

Samsung and Intel exist and can serve TSMC clients for bleeding edge nodes. More fabs exist at older nodes. So if something happens to TSMC, there are options.

Though it would require significant work to move. And the alternatives may not perform as well. And there 100% would be supply shortages.

So overall pretty bad but I think Apple could survive it.

Samsung and Intel aren’t capable of making chips that either Nvidia or Apple use. Intel isn’t even set up to do contract manufacturing and their entire software and hardware design tool chain is not industry standard and is geared toward their own chipsets.

Intel’s first major announcement for its foundry is manufacturing 16nm chips for MediaTek. This was state of the art for TSMC back in 2013

https://www.theregister.com/2022/07/25/mediatek_chooses_inte...

https://anysilicon.com/semipedia/tsmc-16nm/

Its also notable they did the same thing recently with Verizon. I thought both VZ and TSM made a lot of sense. Adjacent to Apple and completely different business profiles. When they pulled the trigger on Verizon buy I thought it made total sense as a risk mitigation to waning iPhone upgrades. Once the upgrade volatility declines, Verizon bleeds less handset promotion money. Users might not buy the next phone, but will keep paying bills. It was really surprising to seem them sell so quickly.

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