On May 15, Berkshire Hathaway reported in a Form 13F filing to the US Securities and Exchange Commission (SEC) that it had completed the sale of its $4 billion stake in Taiwan Semiconductor Manufacturing Co (TSMC). This sale completed a process that began in February, when Berkshire Hathaway announced that it had sold 86% of its holdings in TSMC.
In April, Berkshire Hathaway’s leader Warren Buffett told Nikkei that the geopolitical tension between the United States and China was “certainly a consideration” in his decision to divest from TSMC.
TSMC, Buffett told Nikkei, is a “well-managed company” but Berkshire Hathaway would find other places for its capital.
At his May 6 morning meeting, Buffett said TSMC “is one of the best-managed companies and important companies in the world, and you’ll be able to say the same thing five, 10 or 20 years from now. I don’t like its location and re-evaluated that.”
By “location,” Buffett meant Taiwan, in the context of the threats made by the United States against China. He decided to wind down his investment in TSMC “in the light of certain things that were going on.” Buffett announced that he would move some of this capital toward the building of a fledgling US domestic semiconductor industry.
TSMC, based in Hsinchu, Taiwan, is the world’s largest semiconductor manufacturer. In 2022, it accounted for 56% of the global market and more than 90% of advanced chip manufacturing.
Buffett’s investment in TSMC was based on the Taiwanese company’s immense grip on the world semiconductor market.
In August 2022, US President Joe Biden signed the CHIPS and Science Act into law, which will provide $280 billion to fund semiconductor manufacturing inside the United States. On December 6, Biden joined TSMC chairman Mark Liu at the $40 billion expansion of TSMC’s semiconductor factories in North Phoenix, Arizona.
Liu said at the project’s announcement that the second TSMC factory is “a testimony that TSMC is also taking a giant step forward to help build a vibrant semiconductor ecosystem in the United States.”
The first TSMC plant will open in 2024 and the second, which was announced in December, will open in 2026.
On February 22 this year, The New York Times ran a long article (“Inside Taiwanese chip giant, a US expansion stokes tensions”) that pointed out, based on interviews with TSMC employees, that “high costs and managerial challenges” show “how difficult it is to transplant one of the most complicated manufacturing processes known to man halfway across the world.”
At the December 6 announcement, Biden said, “American manufacturing is back,” but it is only back at a much higher cost (the plant’s construction cost is 10 times what it would have cost in Taiwan).
Wayne Chiu, an engineer who left TSMC in 2022, told The New York Times: “The most difficult thing about wafer manufacturing is not technology. The most difficult thing is personnel management. Americans are the worst at this because Americans are the most difficult to manage.”
‘Blow up Taiwan’
US Ambassador Robert O’Brien, the former national security adviser of Donald Trump, told Steve Clemons, an editor at Semafor, at the Global Security Forum in Doha, Qatar, on March 13, 2023, “The United States and its allies are never going to let those [semiconductor] factories fall into Chinese hands.”
China, O’Brien said, could build “the new OPEC of silicon chips” and thereby “control the world economy.” The United States will prevent this possibility, he said, even if it means a military strike.
On May 2, at a Milken Institute event, US congressman Seth Moulton said that if Chinese forces move into Taiwan, “we will blow up TSMC.… Of course, the Taiwanese really don’t like this idea.”
These outlandish statements by O’Brien and Moulton have a basis in a widely circulated paper from the US Army War College, published in November 2021, by Jared M McKinney and Peter Harris (“Broken Nest: Deterring China from Invading Taiwan”).
“The United States and Taiwan should lay plans for a targeted scorched-earth strategy that would render Taiwan not just unattractive if ever seized by force, but positively costly to maintain. This could be done effectively by threatening to destroy facilities belonging to the Taiwan Semiconductor Manufacturing Company,” they write.
Right after Moulton made his incendiary remarks, former US defense undersecretary Michèle Flournoy said it was a “terrible idea” and that such an attack would have a “$2 trillion impact on the global economy within the first year and you put manufacturing around the world at a standstill.”
Taiwan officials responded swiftly to Moulton, with Defense Minister Chiu Kuo-cheng asking, “How can our national army tolerate this situation if he says he wants to bomb this or that?” While Chiu responded to Moulton’s statement about a military strike on TSMC, in fact, the US government had already attacked the ability of this Taiwanese company to remain in Taiwan.
Taiwanese Economics Vice-Minister Lin Chuan-neng said in response to these threats and Buffett’s sale of TSMC that his government “will do its utmost to let the world know that Taiwan is stable and safe.”
Thus the incendiary remarks aimed at China now threaten the collapse of Taiwan’s economy.
Made in Japan
In his May 6 meeting, Warren Buffett said something that gives a clue about where semiconductor manufacturing might be diverted. “I feel better about the capital that we’ve got deployed in Japan than Taiwan,” he said.
In 1988, 51% of the world’s semiconductors were made in Japan, but as of 2022, the number is merely 9%. In June 2022, Japan’s Ministry of Economy, Trade, and Industry (METI) announced that it would put in 40% of a planned $8.6 billion for a TSMC semiconductor manufacturing plant in Kumamoto.
METI said in November that it had selected the Rapidus Corporation, which includes a stake by NTT, SoftBank, Sony and Toyota, to manufacture next-generation 2-nanometer chips. It is likely that Berkshire Hathaway will invest in this new business.
This article was produced by Globetrotter, which provided it to Asia Times.
Vijay Prashad is an Indian historian, editor, and journalist. He is a writing fellow and chief correspondent at Globetrotter. He is an editor of LeftWord Books and the director of Tricontinental: Institute for Social Research. He is a senior non-resident fellow at Chongyang Institute for Financial Studies, Renmin University of China. He has written more than 20 books, including The Darker Nations and The Poorer Nations. His latest books are Struggle Makes Us Human: Learning from Movements for Socialism and (with Noam Chomsky) The Withdrawal: Iraq, Libya, Afghanistan, and the Fragility of US Power.