The Berkshire Hathaway-TSMC Split: What it Means for Apple’s Supply Chain Security

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Pay attention to the following sentence it’s One of the most important key phrases
“Concerns about Taiwan’s stability”

Warren Buffett’s Berkshire Hathaway has made a significant move in the stock market by selling all of its shares in Taiwan Semiconductor Manufacturing Company (TSMC). This abrupt decision is rooted in concerns about the stability of Taiwan, raising questions about the impact on Apple, which heavily relies on TSMC as its primary chip manufacturer.

Tensions have been mounting between China and Taiwan, with China claiming Taiwan as a part of its territory. This issue has been ongoing for a long time but has gained more attention lately, particularly due to the current geopolitical climate. Warren Buffett’s recent decision to divest from TSMC is seen as a reflection of these growing concerns.

One of the key aspects of this development is Apple’s dependency on TSMC for manufacturing its processors. Apple has traditionally sought multiple suppliers for crucial components to ensure resilience and negotiation leverage. However, this strategy took a significant shift with the iPhone 7’s launch in 2016, as TSMC surged ahead in the production of small-process chips, subsequently becoming the exclusive supplier of iPhone processors. This exclusive reliance on a single supplier exposes Apple to potential vulnerabilities.

While the possibility of a Chinese invasion of Taiwan has always loomed, recent global events have altered the risk landscape. The response to Russia’s invasion of Ukraine has shown China that potential economic consequences may outweigh military ones, as sparking a military conflict could escalate into a nuclear confrontation.

Buffett’s decision to divest from TSMC is a direct response to the increasing political and economic tensions in the region. His concern is primarily focused on the security of Apple’s supply chain, which relies on TSMC’s production capabilities in Taiwan.

TSMC is not only a critical player in Apple’s supply chain but also the world’s largest contract chipmaker, serving companies like AMD, Qualcomm, and various major tech players. Taiwan, a self-governing island, stands as a flashpoint in international politics, with China maintaining its territorial claims.

The United States has historically been committed to aiding Taiwan in defending itself against a potential Chinese invasion. However, recent developments have caused uncertainty in the global response to such a situation, particularly the fear of triggering a nuclear conflict.

Some experts speculate that China might opt for a blockade of Taiwan rather than a full-scale invasion, aiming to inflict substantial economic damage on American companies, including Apple, by cutting off exports from Taiwan.

In summary, Warren Buffett’s decision to divest from TSMC highlights the growing risks associated with Taiwan’s stability and its impact on Apple’s supply chain. With China’s territorial claims and escalating tensions in the region, the potential disruption of chip supplies poses a significant threat to Apple’s business operations.

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