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Fund manager ETF Securities has gone live with a new Semiconductors ETF on Australia’s ASX. The launch comes at a time when the globe is facing an acute semi-conductor shortage, taking a toll on manufacturers and their production lines.

While there is a shortage in semiconductors, demand remains high. New industries like the 5G telecommunications roll out or the anticipated upsurge in demand for smart devices in the home mean that the industry is facing unprecedented pressures.

The ETFS Semiconductor ETF (ASX:SEMI) is going to be tracking the Solactive Global Semiconductor 30 Index. This represents 30 companies that are active across the semiconductor value chain.

Eligible companies must be part of the Solactive GBS Global Markets Semiconductor All Cap USD Index and classified – by a common industry classification system – in the semiconductors industry, or semiconductor equipment and services and semiconductor manufacturing subsectors. Furthermore, companies must have their primary listing in one of the countries that are part of the Developed Markets – as defined by the Solactive Country Classification Framework – or in South Korea or Taiwan.

“At ETF Securities we have a focus on identifying and developing products that enable our clients to benefit from rapid technological advances across the globe,” said Kanish Chugh, Head of Distribution at ETF Securities in Australia. “Observing the rise in prominence of the semiconductor across a vast array of industries from gaming to automobiles, this product addresses a gap in the Australian market for investors wanting exposure to this growing sector.”

According to the World Semiconductor Trade Statistics, worldwide semiconductor market growth is expected to rise from 6.8% last year to 19.7% this year. The market has been valued at $527bn. Growth of 8.8% is forecast for 2022. Companies active in this market are expected to enjoy substantial tailwinds going into 2022-23 and we expect this to be one of the hottest sectors out there next year.

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Better than expected results from companies in this sector

ETFs in this sector have been lifted by better-than-expected results of some of their top constituents. A burst of positive earnings reports from key players like NVIDIA, Texas Instruments, Intel, Qualcomm and Advanced Micro Devices spread optimism in the sector.

NVIDIA, the second largest semiconductor company by market cap reported record revenue last month for the second quarter fiscal year 2022, of $6.51 billion, up 68% year-on-year and 15% from the previous quarter. The chipmaker also posted record revenue from the company’s Gaming, Data Center and Professional Visualization platforms.

There are already several ETFs on the market which track the semiconductor industry, and they have predictably been putting in some good numbers this year. Some of these may be limited to expert / qualified investors, so you will need to discuss these with your broker if you cannot see them on your trading platform of choice.

What other semiconductor ETF plays are out there?

Among the top performers is the Direxion Daily Semiconductor Bull 3X Shares ETF (NYSEARCA:SOXL). It is quite a volatile performer, but is up +23% in the last three months.

Also worthy of note is the VanEck Vectors Semiconductor ETF (NASDAQ:SMH), which with $6bn in assets under management and an A+ rating from TrackInsight, is one of the big beasts in the space. This one does not use leverage, unlike the Direxion ETF mentioned above.

In Asia there is the Global X China Semiconductor ETF (HKSE:3191) which is following the FactSet China Semiconductor Total Return Index. This has around HKD 1.3bn under management at the moment, and has delivered a punchy 20.6% to investors in the last three months.

Related

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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