After the market on November 14, 2022, US time, Berkshire submitted a 13F quarterly report to US Securities and Exchange Commission . The report shows that only established a position in TSMC in the third quarter of 2022, buying a total of 60.06 million shares. The market value of holdings reached US$4.1 billion, accounting for 1.39% of the total position . This is actually considered a change in Buffett . You should know that his previous investment philosophy was not to touch technology stock . However, in recent years, from Apple to TSMC, there are also regrets Google , Amazon , etc. He is paying more and more attention to tech stock . To put it bluntly, the changes in emerging industries are irresistible, and they will be eliminated if they do not change. So, can investors buy the semiconductor industry with their eyes closed? Of course, there are still many ways to study and use for me.
TSMC benefited from policy support investment
Buffett adheres to value investment, so he has not touched technology stocks in most of his investment career, but we can see that in recent years, he has paid more and more attention and held heavy holdings in technology stocks. In addition to Apple, he has also begun to intervene in 2022 TSMC, the leading semiconductor company. In fact, no matter what, the position of is the most real expression of an investor, including the one who was bearish at that time, Tesla . After Tesla founded the new energy vehicle industry chain, Munger admitted that his judgment failed and changed his words to praise "Tesla is a small miracle of the automotive industry and has made real contributions to human civilization." . Before that, the missed Internet stocks such as Google and Amazon also made Munger admit that he was wrong. This is actually a change brought about by the factors of the times, and he had to study technology stocks, otherwise the big profits of the times will be missed again and again.
Buffett's position changes over the past 10 years
In terms of trends, the semiconductor industry led by TSMC has experienced a relatively big test in 2022. This is in line with Buffett's usual idea of buying low when taking advantage of the market divergence. In fact, there are also policy factors. In early December 2022, TSMC's Phase II project of its factory in Arizona, USA began construction, with investment increasing from US$12 billion to US$40 billion. It is the company's largest overseas investment and the largest investment the state has obtained so far. This has also become the most significant achievement after the Chip and Science Act , and is expected to produce 600,000 wafers each year to meet the demand for advanced chip in the United States. ——This policy factor is particularly obvious, and other countries have similar behaviors to stimulate investment in semiconductor .
It is obvious that TSMC benefits from this investment policy, which is why it is favored by Buffett. Previously, TSMC's first phase project was expected to start producing 4-nanometer process technology from 2024. The second phase of the project is expected to start production of 3nm process technology in 2026. After the two factories of are put into production, their annual revenue is expected to reach US$10 billion, and the market value of their terminal products is estimated to exceed US$40 billion. Cook said Apple will expand its cooperation with TSMC when the U.S. factory opens in 2024. Therefore, although there is a factor in 2022 that cuts orders, future industry transformation is also key. Therefore, TSMC is a factor that other semiconductor stocks do not have.
Thinking and Research on Moat Factors
So Buffett pays attention to moats, what is TSMC's moat? On the surface, it is a well-deserved leader in the semiconductor foundry field. accounts for 59.5% of the global market share of , far exceeding Intel , Samsung , SMIC and other companies. At the same time, it has support from major customers such as Qualcomm and Nvidia. The market share of 5nm will be around 90% in the next few years, while 3nm will be between 80%-90%. But the real key is the high operating profit margin, which is basically nearly twice the average level of 15% semiconductor foundry in the same industry, and . This is also reflected in Tesla. Whether it is promotion or external impact, it maintains high gross profit margins, which is the key to making it the leader.In this regard, there are obvious differences between domestic companies and they can be bigger, but the gross profit margin always declines, which needs to be paid attention to.
TSMC's average profit margin over the past decade
Now the semiconductor cycle is close to the bottom, but the relevant factors still need to be confirmed in the first half of 2023. The reason for the periodicity of semiconductors is the mismatch between supply and demand in . That is, when semiconductor demand increases, these chip manufacturers will generally place orders for TSMC to manufacture, so TSMC will need a time interval to manufacture. After this period, it is very likely that the chip market will cool down, so that the production capacity will be overwhelming. The extra chips cannot be sold, so they can only reduce the price, thus entering the downward cycle of . The upward cycle is the same, that is, everyone reduces production capacity, and then the supply of chips slowly shrinks, prices begin to rise, and then enter a new cycle.
So, next, we will also focus on studying industry data factors. After all, we cannot rely on Buffett to play TSMC to think that the game of semiconductors can be smooth sailing, so it needs to be implemented in various industry key indicators.
