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A Peek at the VanEck Vectors Semiconductor ETF

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Sep. 8 2017, Published 12:04 p.m. ET

Fund overview

The VanEck Vectors Semiconductor ETF (SMH) aims to replicate the price and yield performance (before fund fees and expenses) of the MVIS US Listed Semiconductor 25 Index. The index is comprised of companies engaged primarily in the production of semiconductors and semiconductor equipment. SMH normally invests at least 80.0% of its total assets in securities that make up the fund’s benchmark index.

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About the index

The MVIS US Listed Semiconductor 25 Index, the underlying index of the VanEck Vectors Semiconductor ETF (SMH), is a market cap–weighted index that tracks the overall performances of the largest and most liquid US listed companies that derive at least 50.0% of their revenues from the semiconductor business. These companies may include foreign companies listed on a US exchange.

Industry overview

Semiconductors (INTC) (TSM), especially related to computing, are the mainstay of modern technology. As technology continues to evolve and improve, semiconductors are increasingly in demand to help power innovative devices. According to the Semiconductor Industry Association, global sales of semiconductors were $33.6 billion in July 2017, a 24.0% rise YoY (year-over-year) and a sequential rise of 3.1%. Although all the key regions posted healthy rises in July, growth in North America was higher at 36.1% YoY and 5.4% sequentially.

Another possible source of growth for semiconductors is the development of crypto currencies. Crypto currencies, which became popular in recent years, are mined using semiconductors, thus providing immense opportunities for future growth. According to Bloomberg, growth in the Ethereum market in 2Q17 boosted the shares of Nvidia (NVDA) and Advanced Micro Devices (AMD) substantially. The VanEck Vectors Semiconductor ETF (SMH) offers investors a vehicle to invest in this fast-growing industry.

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