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
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:
|
|
Number of shares |
The number of shares you want to buy. |
| Order type |
These are the types of orders available:
|
| 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.
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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