The semiconductor space has been rebounded nicely, outpacing
the broad markets this year. But of late, the space has shown
some weakness due to the sharp fall in price of Intel Corp. (
), the largest chip maker in the world (read:
6 ETFs Beating the Market Over the Past Year
Inside Intel Slump
Recently, Apple (
) inked a deal with Taiwan Semiconductor Manufacturing (
) in which the latter will produce A-series chips for Apple's iOS
devices early next year. This news has negatively influenced the
Intel share price as the chances of Intel becoming a contract
chipmaker for Apple is less likely.
Further, Intel fell 3.64% in Monday's trading session due to
negative revisions by three analysts. This marks nearly 9%
decline since mid June. The analysts are worried that Intel might
cannibalize its sales of desktop and laptop microprocessors with
the cheaper "Atom" mobile chips.
This could lead to hard times in maintaining the same level of
margins in mobile devices. Moreover, the weakening personal
computer market trends are weighing on the top line of Intel
The Top Choice in the Tech ETF World?
This chain of negative news in Intel has made trading
difficult for semiconductor
over the past week, in particular those with a large exposure to
Intel including the following ETFs:
The most popular in the sector,
Market Vectors Semiconductor ETF (
, lost 2.14% in Monday trading, though it is still up nearly 16%
in the year-to-date timeframe. The fund provides concentrated
exposure to 26 securities by tracking the Market Vectors US
Listed Semiconductor 25 Index.
Intel takes the top position with nearly 20% of assets,
followed by Taiwan Semiconductor (13.45%) and Texas Instruments
(6.30%). The fund has $263.2 million in its asset base and
charges an expense ratio of 35 bps.
iShares PHLX Semiconductor ETF (
, having amassed $234.8 million, was down 2% in Monday trading.
It has nevertheless delivered impressive returns of over 22% so
far this year. The ETF follows the PHLX Semiconductor Sector
Index and offers concentrated exposure to 31 firms.
Intel takes the third spot in the basket with nearly 7.8%
share while the first two spots -Texas Instrument and Applied
Materials - do not make up for more than 7.9% share in either
case. SOXX does charge a higher fee of 48 bps a year from
investors (see more in the
The other two ETFs -
SPDR S&P Semiconductor ETF (
PowerShares Dynamic Semiconductors Fund (
- with less exposure to Intel, lost 2.21% and 1.12%,
respectively, in the rough Monday trading session.
XSD tracks the S&P Semiconductor Select Industry Index and
holds 51 stocks in the portfolio. The product provides
diversification benefits across each security as no single
company takes up more than 3.1% of the assets. The fund has
accumulated $63.1 million in AUM and charges 35 bps in fees per
On the other hand, PSI follows the Dynamic Semiconductors
Intellidex Index. Holding 30 securities, the fund has large
exposure to Micron Technology with nearly 6.01% of assets,
closely followed by Analog Devices and Applied Materials with 5%
share each. The ETF has $16.2 million in AUM and charges 0.63% in
In the year-to-date timeframe, XSD has added 19% while PSI has
gained 10.5% YTD (read:
Why Semiconductor ETFs Are Crushing the
Although the ETFs have been stressed due to Intel's sluggish
performance, these gained nicely in the year-to-date frame (read:
Semiconductor ETFs for 2013?
The gains could continue moving forward based on some solid
trends in the space. Some analysts are expecting global
semiconductor sales to continue to rise - even with a decline in
PC shipments -given their requirement in the emerging technology
applications like tablets and smartphones, so don't write off
semiconductor ETFs just yet.
Still, make sure to pay close attention to the space this
earnings season, as it could go either way for this important
corner of the market. However, with some strong Zacks Industry
Ranks for a number of semiconductor-focused segments, the recent
INTC weakness could make this a decent buying opportunity, should
firms in this industry live up to their lofty Ranks this earnings
season and beat rising estimates, despite the Intel worries.
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INTEL CORP (INTC): Free Stock Analysis Report
PWRSH-DYN SEMI (PSI): ETF Research Reports
MKT VEC-SEMICON (SMH): ETF Research Reports
ISHARS-PHLX SEM (SOXX): ETF Research Reports
SPDR-SP SEMICON (XSD): ETF Research Reports
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