Why Berkshire Hathaway’s Latest Big Bet Is on a Taiwanese Chip Maker

For years, Berkshire mostly avoided technology stocks. In fact, in Berkshire’s 2008 annual report, Mr. Buffett went so far as to say he preferred simple businesses. “If there’s lots of technology, we won’t understand it,” he said.

But over the following years, Mr. Buffett’s view of technology shifted significantly. In 2011, Berkshire invested $10.7 billion in the shares of

International Business Machines Corp.

IBM 0.10%

, an ill-fated bet that it exited entirely in 2018. Berkshire made another large foray into the sector in 2016, when it disclosed it had a nearly $1 billion stake in

Apple Inc.

AAPL 1.19%

The iPhone maker is now Berkshire’s biggest single stockholding. Berkshire also had a roughly $1 billion stake in

Amazon.com Inc.

as of the end of the third quarter. Earlier this year, the Omaha, Neb., conglomerate revealed it had built a roughly $4 billion stake in computer-and-printer maker

HP Inc.

The purchase of 60 million shares of TSMC, which Berkshire paid roughly $4.1 billion for, has vaulted the chip maker into its top 10 stockholdings. 

“TSMC welcomes all investors with the propensity to buy and hold TSMC’s stock,” TSMC spokeswoman Nina Kao said in emailed comments. American depositary receipts of TSMC soared 11% Tuesday, scoring their biggest one-day gain since 2020.

The timing of Berkshire’s investment is notable. The semiconductor industry has faced a reckoning this year. After enjoying a surge in profits during the pandemic, chip companies have cut costs, reduced output and reined in near-term capital-spending plans because of slumping demand. 

TSMC hasn’t been immune to those pressures. Its ADRs are down 43% from their January peak.

Still, many chip executives remain optimistic about long-term demand for their products. Global sales are expected to roughly double to more than $1 trillion annually in the next decade, thanks to improvements in manufacturing capacity and subsidies for factory building by governments in the U.S. and Europe. 

TSMC is also a key provider of chips to Apple. Mr. Buffett has described the iPhone maker as Berkshire’s second-most important business, following its insurance units. 

“There’s a school of thought that believes we’re close to a bottom for chip stocks,” said Cathy Seifert, a CFRA Research analyst. Given “Taiwan Semi is considered by many to be a premier chip maker,” the bet makes sense for Berkshire, she added.

Berkshire’s investment also stands to benefit from any potential cooling of tensions between the U.S. and China.

TSMC’s headquarters are in Taiwan, the self-ruled island that is home to more than 23 million residents. Although TSMC has been making plans to expand existing factories in Japan and build multiple plants in the U.S., as well as potentially in Singapore, its production capacity remains concentrated in Taiwan.

Beijing has claimed Taiwan is part of its territory and threatened to take it by force, if necessary. In response, the U.S. has vowed to defend Taiwan from a Chinese attack.

After months of tension, President Biden and Chinese leader

Xi Jinping

sought this week to stabilize relations between their two countries. They met Monday in Bali, Indonesia, for the first time since Mr. Biden became president. 

—Yoko Kubota contributed to this article.

Write to Akane Otani at akane.otani@wsj.com