Charlie Munger: Investing in Semiconductor Industry 2023 | Collection: Charlie Munger #279
[Transcript]
BECKY QUICK
"How should we think about the political climate around Taiwan and the long-term impact on the semiconductor industry? Specifically, do you see the chips — the CHIPS and Science Act favorably?"
CHARLIE MUNGER
Well, the semiconductor industry is a very peculiar industry.
In semiconductor industry, you have to take all the money you’ve made, and with each new generation of chips, you throw in all the money you’ve previously made. So it’s compulsory investment of everything you want to stay in the game. Naturally, I hate a business like that.
In Berkshire, we like a whole lot of surplus money to come in that we can do something else with. And of course, now if you’re now ahead of it, like Taiwan Semiconductor is, that may be a good buy at these prices. It’s not at all clear to me that they’re not going to succeed mightily.
But it’s a difficult — it's a business of an enormous promise for the big winner, but it’s a difficult business and requiring everybody to keep increasing the bets on and on with all the money.
And so — it’s not perfect, that semiconductor business. But remember when Intel owned the world? Intel was once the Taiwan Semiconductor business of the world. They invented the damn business, and they’ve dominated it for decades. And it’s not clear to me that Intel is going to have a very decent semiconductor business, getting as far behind as they are now. My answer is it’s not so damn foolproof as it looked.
BECKY QUICK
Even with the incentives to build plants here in the United States, like Intel is doing in Ohio?
CHARLIE MUNGER
Well, of course, that will really help. But they’re borrowing money. There’s no indication that government is going to forgive the loans or something. It’s not like the recent loans to the business where they said, “we’ll loan you the money and then oh, keep the money."
The government is not planning to do that at least new semiconductor loans. And so — it’s not a field where I feel I have a lot of expertise. What the hell do I know about semiconductors?
BECKY QUICK
Do you worry about any conditions that the government would put on companies that end up using any of that money with semiconductors or anything else?
CHARLIE MUNGER
Well, of course, all of that, it’s deeply intertwined with government policies in both China and the United States. So I would rather have something that’s more foolproof myself. But I do think Taiwan Semiconductor is the strongest semiconductor company on earth. So I am a big admirer of what they’ve achieved. It’s just incredible of what they’ve achieved.
BECKY QUICK
Speaking of things you like better…
CHARLIE MUNGER
By the way, maybe a wonderful investment, the fact that I don’t like it because I am an old man, and I don’t like learning new tricks. That doesn’t mean it isn’t right for some younger person that understands it better than I do.
(Source: https://www.youtube.com/live/9VVPO3KWj3A?feature=share)
[YAPSS Takeaway]
The semiconductor industry is a difficult business that requires constant investment, but Taiwan Semiconductor is currently the strongest semiconductor company on earth.
