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The semiconductor space received a good push from the ongoing COVID-19 pandemic as the demand for consumer electronics like personal computers, laptops and smartphones shot up. Notably, the chip market has witnessed strength in the end markets like mobile phones, notebooks, servers, automotive, smart home, gaming, wearables and Wi-Fi access points, per an International Data Corporation (IDC) report.
The space has also seen accelerating demand with the growing usage of electronic vehicles along with the automobile sector becoming specifically advanced to include more electronic components in vehicles that rely on chips. The coronavirus-induced work-from-home and web-based learning trends spurred demand for chips from PC manufacturers and data-center operators.
The rising demand for semiconductors however is not being matched by adequate supplies and has resulted in a rise in prices. The microchip supply crunch was previously impacting only the automobile industry but now smartphone and other electronic goods manufacturers are also bearing its brunt. In fact, advisory firm Forrester projects the chip shortage to last through 2022 and into 2023, which is a concern. The introduction of expensive and new generation chips has also been leading to an enhancement in product mix for semiconductors (per a CNBC article).
A report by trade credit insurer Euler Hermes projects the semiconductor space, which saw sales rising 26% to $553 billion in 2021, to witness another 9% rise in sales and surpass the $600 billion mark for the first time in 2022. In this regard, analysts at Euler Hermes commented that, “The current semiconductor cycle has been firing on all cylinders since the industry emerged from its worst recession in 2019,” per a CNBC article.
Semiconductor ETFs Poised to Gain
The growing adoption of cloud computing and the ongoing infusion of AI, machine learning and IoT are expected to create solid opportunities in 2022. Moreover, the revolutionary 5G platform is expected to act as a major catalyst for semiconductor revenues in the mobile phone market.
Investors aiming to make the most of this uptrend in a diversified way could consider the following ETFs:
iShares Semiconductor ETF SOXX
iShares Semiconductor ETF follows the ICE Semiconductor Index and offers exposure to 30 firms. The fund has amassed $10.01 billion in its asset base. It charges 43 basis points (bps) in fees a year from investors. It sports a Zacks ETF Rank #1 (Strong Buy) with a High-risk outlook (read: Bet on These 5 ETF Areas for 2022 ).
VanEck Semiconductor ETF SMH
This fund provides exposure to 25 securities by tracking the MVIS US Listed Semiconductor 25 Index. The product managed assets worth $8.27 billion and charges 35 bps in annual fees and expenses. The fund currently carries a Zacks ETF Rank #1 with a High-risk outlook (read: 3 Sector ETFs to Win Despite Soft Manufacturing Data).
First Trust Nasdaq Semiconductor ETF FTXL
This fund seeks investment results that correspond generally to the price and yield, before fees and expenses, of the Nasdaq US Smart Semiconductor Index. FTXL has accumulated $118.8 million of AUM. The expense ratio is 0.60%. FTXL presently has a Zacks ETF Rank of 2 (Buy).
Invesco Dynamic Semiconductors ETF PSI
This fund tracks the Dynamic Semiconductor Intellidex Index, holding 32 securities in its basket. The product has an AUM of $917.9 million. The expense ratio is 0.56%. PSI sports a Zacks ETF Rank #1 at present with a High-risk outlook (read: 5 Market-Beating, Top-Ranked ETFs of 2021).
SPDR S&P Semiconductor ETF XSD
This fund tracks the S&P Semiconductor Select Industry Index. The fund has AUM of $1.58 billion. It charges 35 bps in fees per year. The product has a Zacks ETF Rank #1, presently, with a High-risk outlook.
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Invesco Dynamic Semiconductors ETF (PSI): ETF Research Reports
VanEck Semiconductor ETF (SMH): ETF Research Reports
iShares Semiconductor ETF (SOXX): ETF Research Reports
SPDR S&P Semiconductor ETF (XSD): ETF Research Reports
First Trust NASDAQ Semiconductor ETF (FTXL): ETF Research Reports
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