Technology

Will 2020 Be Another Breakout Year for Semiconductors? These Are The ETFs to Own

Chris Lange

Many see semiconductor trends as leading indicators of technology and broader electronics demand. In a wider sense, semiconductor and tech stocks may be leading indicators for the economy and markets in general. Markets are currently at all-time highs, with Chinese trade talks progressing, in semiconductors especially, there seems to be more room to run higher.

If any industry is prone to cyclicality, it is the semiconductors, and that trend has been in place for going on 30 years. The long-term outlook remains reasonably bright.

The Chinese trade war hurt U.S. semiconductor firms in 2019, but the recovery was sharp. These suppliers have a relatively high “ship-to” revenue exposure to China. This high exposure to China puts the semiconductor industry at greater risk to the escalation in the U.S.-China trade war than many other segments of technology, but with talks progressing this seems to be in the rearview.

To mitigate this risk and concerns about picking the winners or the losers within the industry, exchange-traded funds offer a sampling and exposure to this market without an all-or-none risk in any single company’s stock. As the saying goes: “There’s an ETF for that strategy.” ETF Database has collected much of the information about these ETFs, among others, and made it easily accessible for those looking to get into the game.

Investors can use a number of ETFs to invest in the volatile semiconductor industry. As you will see, the top semiconductor ETFs are all constructed with different leaders and components dominating the returns and focus of each one.

iShares PHLX Semiconductor ETF (NASDAQ: SOXX) has been around since July 2001, and it aims to track the PHLX Semiconductor Sector Index. This fund seeks to track the investment results of an index composed of U.S. equities in the semiconductor sector. Note that this is the largest semiconductor ETF, with $2.35 billion in assets under management. Its overall expense ratio is 0.46%, and it traded up about 60% in 2019. This ETF has a total of 31 holdings. The top 10 holdings include mostly large-cap domestic semiconductor companies:

  1. Nvidia (8.05%)
  2. Texas Instruments (7.90%)
  3. Qualcomm (7.82%)
  4. Intel (7.64%)
  5. Broadcom (7.40%)
  6. Advanced Micro Devices (4.35%)
  7. Micron (4.19%)
  8. NXP Semiconductors (4.08%)
  9. Lam Research (4.07%)
  10. Taiwan Semiconductors (4.06%)

VanEck Vectors Semiconductor ETF (NYSEARCA: SMH) has been around since December 2011 and aims to track the MVIS US Listed Semiconductor 25 Index. This fund seeks to track the overall performance of companies involved in semiconductor production and equipment. It has $1.49 billion in assets under management. Its overall expense ratio is 0.35%, and it traded up 62% in 2019. This fund has a total of 26 holdings. The top 10 holdings include a handful of large-cap U.S. semiconductors:

  1. Taiwan Semiconductor (13.28%)
  2. Intel (10.64%)
  3. Nvidia (6.04%)
  4. Advanced Micro Devices (4.97%)
  5. Texas Instruments (4.97%)
  6. ASML (4.96%)
  7. Qualcomm (4.82%)
  8. Broadcom (4.70%)
  9. Micron (4.67%)
  10. Lam Research (4.55%)

SPDR S&P Semiconductor ETF (NYSEARCA: XSD) has been around since February 2006 and aims to track the S&P Semiconductor Select Index. The fund seeks to provide exposure to the semiconductors segment of the S&P TMI, which comprises the Semiconductors sub-industry. It has $505.8 million in assets under management, its overall expense ratio is 0.35% and it gained roughly 64% in 2019. This ETF has a total of 37 holdings. Its top 10 holdings include mostly domestic semiconductor firms:

  1. Advanced Micro Devices (3.32%)
  2. Semtech (3.28%)
  3. Ambarella (3.28%)
  4. Skyworks Solutions (3.22%)
  5. Cirrus Logic (3.19%)
  6. Universal Display (3.17%)
  7. ON Semiconductor (3.17%)
  8. Micron (3.13%)
  9. Nvidia (3.13%)
  10. Intel (3.09%)

Invesco Dynamic Semiconductors ETF (NYSEARCA: PSI) has been around since June 2005. It aims to track the Dynamic Semiconductors Intellidex Index. This ETF seeks to track companies that are principally engaged in the manufacture of semiconductors. It was last seen to have $231.5 million in assets under management. Its overall expense ratio is 0.58%, and it traded up over 51% in 2019. This fund has a total of 31 holdings. The top 10 holdings include mostly domestic semiconductor firms:

  1. Advanced Micro Devices (5.46%)
  2. Micron (5.24%)
  3. Nvidia (5.06%)
  4. Texas Instruments (4.94%)
  5. Applied Materials (4.91%)
  6. Qualcomm (4.88%)
  7. Intel (4.80%)
  8. Broadcom (4.65%)
  9. Skyworks Solutions (3.10%)
  10. Diodes (3.10%)