'Buffett's Pick' TSMC... Will Samsung Accelerate Taylor Foundry Plant?

Warren Buffett Makes First TSMC Stock Purchase... Prefers Companies with Hard-to-Overcome Entry Barriers
Samsung Starts Construction on 5 Buildings Recently... Accelerates Chase for No.1 TSMC

Samsung Electronics' new foundry plant under construction in Taylor, Texas, USA.
[Photo by Taylor City]

[Asia Economy Reporter Han Ye-ju] Berkshire Hathaway, the investment company operated by Warren Buffett, known as the "investment genius," has scooped up shares of Taiwan's TSMC. This move is interpreted as a judgment that the corporate value of the world's No. 1 foundry (semiconductor contract manufacturing) company will increase amid the ongoing semiconductor dominance battle between the U.S. and China. The calculation for Samsung Electronics, which aims to be the "No. 1 system semiconductor" company, has become even more complicated. It is expected to accelerate the construction of its second foundry plant in Taylor, Texas, to strengthen its dominance in the foundry market.

According to industry sources on the 20th, Berkshire disclosed on the 14th that it purchased more than 60 million American Depositary Receipts (ADRs) of TSMC issued in the U.S. during the third quarter. This amounts to about $4.1 billion (approximately 5.4 trillion KRW). This is nearly half of the $9 billion Berkshire Hathaway invested in stocks during the third quarter. It corresponds to a 1.2% stake in TSMC.

Berkshire Hathaway's purchase of TSMC shares is interpreted to send two major messages to the market. The most representative message is that although TSMC's stock price has fallen about 40% this year, the value of foundries remains intact. While global semiconductor demand has sharply declined, foundry supply still falls short of demand.

Additionally, Berkshire Hathaway is known for investing in companies that have built entry barriers making it difficult for competitors to emerge. Tom Russo, a partner at investment advisory firm Gardner Russo & Quinn, explained, "It seems Berkshire Hathaway believes the world cannot function without TSMC's products," adding, "Only a very few companies can accumulate the capital necessary to produce semiconductors, which are increasingly central to everyday life."

TSMC has recently accelerated its semiconductor market strategy by announcing the completion of its second large-scale semiconductor production facility in the U.S. According to The Wall Street Journal (WSJ), TSMC is adding another semiconductor production plant in Arizona. The investment scale is expected to match the first semiconductor facility announced in 2020, amounting to $12 billion (approximately 16.5 trillion KRW).

As of the second quarter of this year, TSMC holds a 53.4% share of the global foundry market, ranking first, while Samsung Electronics holds 16.5%, ranking second. For foundries to become a stable source of revenue for Samsung Electronics in the future, chasing TSMC is considered a prerequisite.

Samsung Electronics is expected to speed up its "shell first" strategy, which involves building production lines ahead of demand. Samsung plans to invest a total of 133 trillion KRW by 2030, including 73 trillion KRW in research and development and 60 trillion KRW in facility investment. Recently, Samsung has started construction of its foundry plant building in Taylor, Texas, which has raised expectations.

According to U.S. real estate media The Real Deal, Samsung's local partner in Texas, Jacobs Engineering, began construction of Samsung's foundry plant on the 5th. This is about one year after Samsung announced an investment plan worth $17 billion (approximately 22.48 trillion KRW), including the construction of the foundry plant in the area. The building under construction consists of five buildings, with a total investment of $1.8 billion. Samsung will produce advanced semiconductors based on the 5-nanometer (nm, one billionth of a meter) process at this plant. The plant is scheduled for completion in November 2024.

Samsung Electronics also plans to surpass TSMC in technology. After successfully mass-producing the 3-nanometer process applying the new transistor technology called Gate-All-Around (GAA) in June, Samsung began shipments in July. In contrast, TSMC's 3-nanometer foundry mass production has been repeatedly delayed. Kang Moon-soo, Vice President of Samsung Electronics' Foundry Business Division, emphasized, "TSMC's 3-nanometer process is based on FinFET technology, but ours is based on GAA technology," adding, "Since we started GAA technology first, we are the most advanced, and competitors will not be able to easily catch up."

This content was produced with the assistance of AI translation services.