The Semiconductor Industry serves as a driver, enabler and
indicator of technological progress. As environmental issues have
become more of a concern today, semiconductor devices are being
made to reduce power consumption, reduce heat dissipation,
capture solar energy, create more efficient lighting solutions
and so forth.
Manufacturing operations have shifted to Asia over the past
decade, but since innovation remains largely within the country,
the sector is one of the biggest employers of labor, with a
corresponding significant impact on the overall economy. (Read:
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The consumer and computing markets consume two-thirds of all
semiconductors, which are increasing convergence between these
two markets such that it is getting more difficult to identify
which devices are computing and which consumer.
PC market growth will be moderate in the next few years, more
than made up by growth in mobile devices. Semiconductors for
mobile devices have their own set of unique challenges: greater
functionality and better experience at higher speeds and
consuming less power. They also have to be priced lower.
Additionally, a lot of the growth in the next few years will come
from price-sensitive emerging markets, which is likely to
According to the CEA, tablets and smartphones will be the
strongest drivers of consumer electronics sales this year, with
smart watches and HD TVs also growing strongly off a very small
base. With overall global spending on technology declining 1%
this year, spending on consumer electronics is not expected to be
more than 2.4%. (Read:
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The move to cloud computing and growing data consumption on
mobile devices is leading to strong demand for suitable wireless
and computing networks. This is currently one of the most
important semiconductor markets. Industrial automation,
automotive, aerospace and defense are also consuming a growing
number of semiconductors, but growth prospects in these markets
are currently not as good.
Forecast for 2014
According to World Semiconductor Trade Statistics (WSTS) data,
there should be positive worldwide semiconductor sales growth of
4.1% in 2014, followed by 3.4% growth in 2015. All products and
categories are expected to grow in both years, although wireless
and automotive are expected to grow the strongest and consumer
and computing relatively stable. (Read:
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Playing the Sector Through ETFs
The ongoing transition across multiple served markets makes it
difficult to select winning semiconductor stocks. However,
companies in charge of core manufacturing generally gain whenever
there is market growth. As a result, it could be easier to play
the sector through ETFs that are more heavily weighted to these
big players.(See all technology ETFs
For those interested in taking a non-equity look at
semiconductors, we have highlighted a few ETFs tracking the
industry below, any of which could be interesting picks:
Van Eck Market Vectors Semiconductor ETF (
The Van Eck Market Vectors Semiconductor ETF was started in 1955
to replicate the price and yield performance of the Market
Vectors U.S. Listed Semiconductor 25 Index.
This Index tracks the overall performance of 25 of the largest
U.S. listed, publicly-traded semiconductor companies. Some of the
largest holdings include
Taiwan Semiconductor Manufacturing Company
(TXN). Its expense ratio is 0.35% and its dividend yields 1.59%.
iShares PHLX Semiconductor ETF (
Founded in 2001, the iShares PHLX Semiconductor ETF is based on
U.S.-listed semiconductor stocks represented by the PHLX
Semiconductor Sector Index.
The top holdings in the ETF include Texas Instruments, Intel
(AMAT). Its expense ratio is 0.48% and its dividend yields
1.18%.Net assets on Feb 11, 2014 were $322.2 million.
SPDR S&P Semiconductor ETF (
Founded in 2006, the SPDR S&P Semiconductor ETF tracks the
S&P Semiconductor Select Industry Index. This is an
equal-weighted ETF comprising 49 stocks with an expense ratio of
0.35% and a dividend yield of 0.52%.
Powershares Dynamic Semiconductors ETF (
The Powershares Dynamic Semiconductors ETF was started in 2005 to
track the performance of the Dynamic Semiconductors Intellidex
Index. At least 90% of its assets are invested in stocks that
comprise the Index. Its top holdings include Micron Technology,
Applied Materials and KLA-Tencor. The Fund and the Index
are rebalanced and reconstituted quarterly in February,
May, August and November. Its expense ratio is 0.63% and the
dividend yields 0.58%.
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PWRSH-DYN SEMI (PSI): ETF Research Reports
MKT VEC-SEMICON (SMH): ETF Research Reports
ISHARS-PHLX SEM (SOXX): ETF Research Reports
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