semi conductor etf

Your Guide to the 6 Best Semiconductor ETFs to Invest in 2022

Semiconductor ETFs have offered great returns to investors over the past decade. While investing in the sector can be daunting and uncertain at times, it is pretty exciting since investors have not reported any substantial losses in the past.

There is also innovation in the industry where chip makers make smaller chips more efficient. New areas are still cropping up that need semiconductors, making it a viable industry to invest in. The recent deep in the industry provides a great entry point for investors interested in investing in the top chip-making companies.

Such underlying fund contain investment assets from different sectors. Here is a look at the best semiconductor ETFs to invest in 2022. In this article, we will take a deep dive into where sets of the different semiconductor ETFs are and help you choose one that matches your needs or you can read our guide on how to invest ETF effectively in Singapore.

6 Semiconductor ETFs to Invest In

There are many semiconductors ETFs but here is an overview of the top performing semiconductor ETFs in the market today:

Name

Symbol Total Assets YTD Returns

VanEck Semiconductor ETF

SMH $5,598.02 40.96%

iShares Semiconductor ETF

SOXX $3.5 billion 46.2%

SPDR S&P Semiconductor ETF

XSD $938.53 Million

33.2%

Invesco Dynamic Semiconductors ETF PSI $456.34 Million

42.13%

Invesco PHLX Semiconductor ETF SOXQ $58.47 million

36.07%

First Trust Nasdaq Semiconductor ETF FTXL $65.6 million

33.38%

 

Please note: the annualized yield is calculated by dividing the net investment income earned by the fund over the recent 30-day period.

1. VanEck Semiconductor ETF (SMH)

SMH closely replicates the MVIS US Listed Semiconductor 25 Index (MVSMHTR) performance. It is one of the largest and most concentrated semiconductor ETFs which houses almost all the companies in semiconductor equipment and production.

VanEck Semiconductor ETF (SMH) is actively managed and has 60% of its total assets in the top 10 holdings. It is also actively managed and features the largest companies in the industry, including Nvidia and Taiwan Semiconductor, which feature 20% of the fund’s portfolio.

Here is a look at the top 10 holding companies in VanEck Semiconductor ETF (SMH):

Ticker

Holding Name % of Net

Assets

Asset Class

TSM

Taiwan Semiconductor Manufacturing Co L 11.11% Stock

NVDA

Nvidia Corp 8.38% Stock

TXN

Texas Instruments Inc 5.45% Stock

MU

Micron Technology Inc 5.15% Stock

AVGO

Broadcom Inc 5.08%

Stock

QCOM Qualcomm Inc 5.04%

Stock

ASML Asml Holding Nv 4.98%

Stock

ADI Analog Devices Inc 4.94%

Stock

INTC Intel Corp 4.93%

Stock

AMAT Applied Materials Inc 4.44%

Stock

 

What We Like About This ETF:

  • It featured the high yielding stocks
  • It is one of the most concentrated semiconductor ETF
  • It’s actively managed

What We Do Not Like About The ETF:

  • It’s a high-risk ETF

2. iShares PHLX Semiconductor ETF (SOXX)

SOXX ETF has about 125 stocks in its portfolio. It is evenly weighted with both U.S. firms and foreign companies. The ETF also features both large and small companies. Its top holding is Qualcomm Inc (QCOM), a software, semiconductor, and wireless services company, Texas Instruments, Inc (TXN), and NVIDIA.

iShares Semiconductor ETF seeks to track an index composed of US-listed equities. It features a modified market cap weighting methodology to spread concentration and individual risk. Information on brokerage share funds is available on BlackRock Fund Prospectus pages. It is important to read through the pages before investing.

Here is a look at the top 10 holding companies in iShares PHLX Semiconductor ETF (SOXX):

Ticker

Holding Name % of Net Assets Asset Class

TXN: NSQ

Texas Instruments Inc 8.79% Stock

AVGO: NSQ

Broadcom Inc 8.43% Stock

NVDA: NSQ

NVIDIA Corp 6.79% Stock

QCOM: NSQ

Qualcomm Inc 5.96% Stock

AMD: NSQ

Advanced Micro Devices Inc 5.14%

Stock

MCHP: NSQ Microchip Technology Inc 4.50%

Stock

ON: NSQ ON Semiconductor Corp 4.20%

Stock

ADI: NSQ Analog Devices Inc 4.12%

Stock

MU: NSQ Micron Technology Inc 4.12%

Stock

NXPI: NSQ NXP Semiconductors NV 4.08

Stock

 

What We Like About This ETF:

  • It’s heavily weighted
  • One of the largest semiconductor ETFs

What We Do Not Like About This ETF:

  • Highly sensitive to trade developments

3. SPDR S&P Semiconductor ETF (XSD)

The SPDR S&P Semiconductor ETF (XSD) is more diversified and might be the best choice for most investors since it is the only equally-weight fund. It features mid-cap and small-cap companies than most ETFs on this list.

XSD has an expense ratio of 0.35% and around 41 holdings on its list. Its top holding is First Solar and SunPower, a notable difference from other ETFs. It stays away from large-cap holdings offering investors exposure to companies they would otherwise not consider.

Here is a look at the top 10 holdings in SPDR S&P Semiconductor ETF (XSD):

Ticker 

Holding company % Net Assets Asset class

RMBS

Rambus Inc. 3.49% Stock

FSLR

First Solar Inc 3.26% Stock

DIOD

Diodes, Inc. 3.21% Stock

MU

Micron Technology Inc. 3.15% Stock

SLAB

Silicon Laboratories Inc 3.15%

Stock

MTSI MACOM Technology Solutions Holdings Inc 3.12%

Stock

WOLF Wolfspeed Inc 3.10%

Stock

ADI Analog Devices Inc. 3.04%

Stock

TXN Texas Instruments Inc. 3.03%

Stock

POWI Power Integrations Inc. 3.02%

Stock

 

What We Like About This ETF:

  • Exposure to a different range of holdings

What We Do Not Like About This ETF:

  • Less exposure to large-cap stocks

chart instrument stock exchange graph

4. Invesco Dynamic Semiconductors ETF (PSI)

PSI ETF is a passively managed ETF launched in 2005. With assets of over $661.02 million in size. It seeks to match the performance of the Dynamic Semiconductor Intellidex Index. It is designed to provide capital appreciation by evaluating companies based on their investment merit criteria, including stock valuation, fundamental growth, investment timelines, and stock valuation.

The ETF has 31 holdings in its portfolio and is more concentrated than its peers. It has had a beta of 1.27 standard deviation of 37.39% for the past three years, making it a high-risk investment option.

Here is a look at the top 10 holding companies in Invesco Dynamic Semiconductors ETF (PSI)

Ticker

Holding company % Net Asset Value Asset Class

AMD

Advanced Micro Devices Inc 6.60% Stock

QCOM

Qualcomm Inc 5.09% Stock

AVGO

Broadcom Inc 5.02% Stock

TXN

Texas Instruments Inc 4.69% Stock

AMAT

Applied Materials Inc 4.56%

Stock

INTC Intel Corp 4.41%

Stock

LRCX Lam Research Corp 4.38%

Stock

MU Micron Technology Inc 4.21%

Stock

MPWR Monolithic Power Systems Inc 3.78%

Stock

KLIC Kulicke & Soffa Industries Inc 3.53%

Stock

 

What We Like About The ETF:

  • Concentrated portfolio than its peers
  • Passively managed, which means lower investment cost

What We Do Not Like About the ETF:

  • High investment risk

5. Invesco PHLX Semiconductor ETF (SOXQ)

The SOXQ tracks the performance of the PHLX semiconductor sector index, including the current prospectus management fee and expenses. The fund invests 90% of its total assets in securities included in the underlying index. The ETF invests following the guidelines and procedures put in place by Nasdaq.

The ETF follows the modified market-capitalization weighted index, which follows the performance of 3o of the largest U.S. companies involved in the semiconductor business. The SOXQ ETF is not diversified as its peers.

Here is a look at the top 10 holding companies in Invesco PHLX Semiconductor ETF (SOXQ):

Ticker

Holding Company % Net Asset Value Asset Class

TXN

Texas Instruments Inc. 8.95% Stock

AVGO

Broadcom Inc 8.42% Stock

QCOM

Qualcomm, Inc. 8.02% Stock

NVDA

NVIDIA Corp 7.44% Stock

AMD

Advanced Micro Devices Inc. 6.65%

Stock

MU Micron Technology Inc. 4.55%

Stock

ADI Analog Devices Inc. 4.46%

Stock

NV NXPI NXP Semiconductors 4.16%

Stock

AMAT Applied Materials Inc. 3.94%

Stock

ASML ASML Holding NV – New York Shares 3.91%

Stock

 

What We Like About The ETF:

  • Tracks the performance of high-cap holdings in the U.S.
  • Utilizes the market-capitalization index mode of investment.

What We Do Not Like About the ETF:

  • It is not diversified

6. First Trust Nasdaq Semiconductor ETF (FTXL)

The FTXL tracks the performance of the Nasdaq U.S. Smart Semiconductor Index TM. The ETF invests 90% of its net assets in stocks and depository receipts in the index’s portfolio.

Additionally, the ETF is designed to provide exposure to the U.S companies in the semiconductor industry selected based on their liquidity and weighted on their cumulative score of different investing factors, including value, volatility, and growth. It is also important to note that the ETF is not diversified.

Here is a look at the First Trust Nasdaq Semiconductor ETF (FTXL):

Ticker

Holding Company % Net Assets Sector Asset Class Market

AVGO

Broadcom Inc 8.02% Stock

TXN

Texas Instruments Inc 7.66% Stock

ADI

Analog Devices Inc 7.54% Stock

AMAT

Applied Materials Inc 7.45% Stock

MU

Micron Technology Inc 6.67%

Stock

SYNA Synaptics Inc 5.72%

Stock

AMKR Amkor Technology Inc 4.96%

Stock

ON ON Semiconductor Corp 4.22%

Stock

KLAC KLA Corp 4.09%

Stock

NXPI NXP Semiconductors NV 3.88%

Stock

 

What We Like About The ETF:

  • Has high-yielding stocks
  • Provides exposure to U.S. companies

What We Do Not Like About This ETF:

  • It is not diversified

 

How to Buy Semiconductor ETF?

Investing in semiconductor ETFs is similar to investing in any other type of ETF listed on the stock market. Before you start investing, remember Investing involves risk, and there is a chance for loss of the principal. Here are the different ways you can buy a semiconductor ETF:

Via Online Brokerage Firms

Brokerage accounts let you buy and sell a range of securities, including ETFs. You can open a brokerage account online. Most brokerage accounts do not have transaction fees, account minimums, or inactivity fees. The process is similar to that of opening a bank account.

If you do not want to trade by yourself, you can have someone do it for you by opening an account with a Robo-advisor. They often create and manage your investment portfolio Robo-advisors will pick the best semiconductor ETFs for your portfolio.

Place A Trade

The process of buying a semiconductor ETF is similar to the process of buying stocks. If you want to trade in semiconductors, your will need to for to the brokerage website with the stock and select ‘trade.’ This means you either want to buy or sell an ETF. You will buy an ETF using its ticker symbol.

Before you place a trade, here are the basic terms that you need to know:

Ticker symbol

This is the unique identifier for the ETF you want to buy. Ensure check you have the correct ticker symbol before proceeding.

Price

The current trading price is determined by the following:

  • A “bid,” or this, is the highest price buyers are willing to pay.
  • An “ask,” or this is the lowest price sellers will take in exchange.

Number of shares

The number of shares you want to buy.
Order type

These are the types of orders available:

  • Market order: Buy on the spot at the best available price.
  • Limit order: Buy only at a stated price (or lower).
  • Stop order: Buy once a specified price has been reached (the stop price), executing the order in full.
  • Stop-limit order: When the stop price is reached, trade becomes a limit order filled based on the price limits.
Commission

Price per trade the brokerage will ask for its service. However, most major brokerages now offer commission-free ETF trades.

Funding source

The bank account linked to your brokerage account —Ensure you have sufficient funds to cover the total cost.

 

ETFs are pretty flexible and easy to trade. Their market price is expected to move up and down. Although ETFs shares are not individually redeemable from the funds investors can buy ETFs and tender them for redemption via a fund in Creation Unit Aggregation only.

The after tax returns are calculated according to NAV using the highest federal marginal income tax rates and does not reflect the impact of local and state taxes. The after tax reruns are not relevant to the investors that hold fund shares via tax-deferred arrangements like individual retirement accounts and 401(K) plans.

See Also: How to Buy ETF in Singapore and ETF vs Mutual Fund vs Unit Trust.

scientist with gloved hand holding microchip

Related Questions (FAQs)

1. What Are the Factors to Consider When Evaluating the Best Semiconductor ETFs?

Here are vital factors that you need to consider when choosing the best semiconductor ETF:

Its Performance

You need to evaluate the performance of a semiconductor in the past year. One-year returns give you a great idea of your expected returns from the ETFs. Most investors ignore newly launched funds with an inception date of less than one year.

If applicable, you can review the ETF for longer periods like 3-, 5-, and 10 years. This will be indicative of the the fund’s future investment performance.

The Structure

Most semiconductor ETFs are open-ended funds rather than closed-ended funds. It is also important to note that an ETF can be a limited partnership, a grantor trust, or ETN. Ensure that the structure of the ETF meets your investment goals.

Business involvement metrics can also help investors have an overview of the activities the fund might be involved in. It is however important to note that the business involvement metrics is not an indication of the fund’s investment objective. 

Expenses

Its expense ratio measures the expenses of a semiconductor ETF. ETFs that have the same index can have different expense ratios. The lowest expense ratio will outperform the one with a higher expense ratio.

Funds Investment Objectives and Fund’s Investment Strategy

It is also important to consider the funds investment objectives of the semiconductor ETF. Check whether the ETF is passive or actively managed. Be sure to choose one that you are comfortable with.

Portfolio Holdings Denominated

These are companies that develop, manufacture and distribute semiconductors. The ETFs can have a collection of passive foreign investment companies. Ensure you look at the market cap of the companies in the ETF. This will give you an idea of whether the ETF is high yielding.

It is also important to note that the foreign currency exchange rates will affect your returns.

State and Local Taxes

It is important to note that after tax returns depend on the investor’s tax situation. This means that your tax situation will affect your capital gains.

It is also important to understand how your state treats passive foreign investment companies. Additionally, it is essential to pay attention to the relevant fund capital gain distributions and other business involvement metrics before making your investment decision.

MSCI ESG Fund Rating

MSCI ESG fund ratings are designed to measure the Environmental, Social, and Governance (ESG) of the fund’s underlying holdings. It allows investors to rank ETFs and mutual funds on a CCC and AAA rating scale according to the Investment Advisers Act of 1940.

This rating allows you to know if the underlying fund employs an ESG investment strategy. The fund’s sustainable characteristics attract new investors who are conscious of the environment.

Companies that support an ESG strategy support a net zero emissions economy that balances the emissions and removal, keeping the environment safer and cleaner. It is, however important to note that there is an information barrier between MSCI and equity Index research. Hence their information cannot be used to determine which securities to buy or sell.

2. What Are Semiconductor ETFs and How Do They Work?

A semiconductor ETF is an exchange-traded fund that invests in a collection of stocks of companies in semiconductor production and distribution. They can either passively track the performance of an index in the semiconductor stock or actively manage it.

Semiconductor ETFs can trade at any time in the stock exchange, similar to stocks.

3. What Are Semiconductor Stocks?

Semiconductor stocks are securities from companies that manufacture and design computer chips and other components. They are part of the tech industry, but they keep changing due to the fast advancements in the tech industry.

4. What Are the Best Semiconductor Stocks?

Here is a list of the best semiconductor stocks by market capitalization: 

Company

Symbol Market cap (USD billions*)

Taiwan Semiconductor

TSM $359

NVIDIA

NVDA $311

Broadcom

AVGO $185

Texas Instruments

TXN $146

Qualcomm

QCOM

$132

Intel INTC

$111

Advanced Micro Devices AMD

$107

Applied Materials AMAT

$74

Micron Technology M.U.

$57

Marvell Technology MRVL

$38

 

5. Are Semiconductor ETFs Are Good Investment Idea for 2022?

Investing in the semiconductor industry offers a long-term opportunity for investors. The semiconductor industry is evolving as fast as the tech industry. The demand for semiconductors is likely to last for a long time. This makes investing in the industry a good idea.

6. What Is the Difference Between SOXX and SOXQ?

SOXX is the ticker name for iShares Semiconductor ETF equity, while SOXQ stands for Invesco PHLX Semiconductor ETF. Both SOXX and SOXQ trade in the U.S. trade markets. Here is the difference between the two ETFs.

SOXQ SOXX
GAIN YTD -44.215 -43.644

NET ASSETS

51M 5.28B

TOTAL EXPENSE RATIO

0.19 0.40
TURNOVER 4.00

32.00

YIELD 1.94

1.36

FUND EXISTENCE 1 YEAR

21 YEARS

 

7. What Is the Difference Between SMH and SOXX?

SMH (VanEck Vectors Semiconductor ETF) and SOXX (iShares PHLX Semiconductor ETF) are the best semiconductor ETFs. SOXX was launched in July 2001, while SMH was launched on December 20, 2011. SMH has an expense ratio of 0.35%, while SOXX has an expense ratio of 0.46%.

Here is a look at the differences between SMH and SOXX:

Name

VanEck Vectors Semiconductor ETF

(SMH)

iShares Semiconductor ETF

(SOXX)

ETF Database Category

Technology Equities Technology Equities

Index

MVIS US Listed Semiconductor 25 ICE Semiconductor Sector Index

Expense Ratio

0.35% 0.40%

Issuer

VanEck BlackRock Financial Management

Structure

ETF

ETF

Inception Date 2000-05-05

2001-07-10

Market Value $5.71B

$5.29B

Shares Outstanding 32.4M

17.3M

ADV(1 month) 4,668,939.0

1,084,543.0

ADV(3 months) 4,052,379.0

1,013,480.0

 

8. What Is SMH Investing?

SMH is a highly concentrated exchange-traded fund that invests in depository receipts and common stocks of semiconductors listed on U.S. stock exchanges.

9. Which Is the Biggest Semiconductor ETF?

The biggest semiconductor ETF is VanEck Semiconductor ETF. It has $ 6.12 B in total assets. Here is a list of all the semiconductor ETFs available.

Ticker

Fund Name Issuer Market Value Expense Ratio Segment

SMH

VanEck Semiconductor ETF VanEck $5.62B 0.35% Equity: Global Semiconductors

SOXL

Direxion Daily Semiconductor Bull 3X Shares Direxion $3.06B 0.90% Leveraged Equity: U.S. Semiconductors

XSD

SPDR S&P Semiconductor ETF State Street Global Advisors $958.95M 0.35% Equity: U.S. Semiconductors

SOXS

Direxion Daily Semiconductor Bear 3X Shares Direxion $863.94M 1.01% Inverse Equity: U.S. Semiconductors

PSI

Invesco Dynamic Semiconductors ETF Invesco $437.39M 0.56% Equity: U.S. Semiconductors

USD

ProShares Ultra Semiconductors ProShares $103.77M 0.95%

Leveraged Equity: U.S. Semiconductors

FTXL First Trust Nasdaq Semiconductor ETF First Trust $65.21M 0.60%

Equity: U.S. Semiconductors

SOXQ Invesco PHLX Semiconductor ETF Invesco $52.28M 0.19%

Equity: U.S. Semiconductors

SSG ProShares UltraShort Semiconductors ProShares $9.90M 0.95%

Inverse Equity: U.S. Semiconductors

NVDS AXS 1.25X NVDA Bear Daily ETF AXS Investments $6.19M 1.15%

Inverse Equity: U.S. Semiconductors

SHOC Strive U.S. Semiconductor ETF Alpha Architect $3.63M 0.40%

Equity: U.S. Semiconductors

SOXX iShares Semiconductor ETF Blackrock 0.40%

Equity: U.S. Semiconductors

 

Closing

Semiconductor ETFs offer retail and institutional investors broad exposure to the semiconductor industry in the USA and other countries. The ETFs feature holding companies that manufacture and distribute integrated circuits, memory chips, and microprocessors. Semiconductor stocks have produced great returns over the past decade, but they have a higher market risk when compared to a broad market index like the S&P 500.

Key Takeaways

  • Semiconductor ETFs are exchange-traded funds that invest in a collection of stocks of companies involved in the production and distribution of semiconductors.
  • Semiconductor ETFs have a higher marker risk than other broad market indexes.
  • Most Semiconductor ETFs feature semiconductor companies in the USA

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