ETFS Semiconductor ETF
ASX Code: SEMI
ETFS Semiconductor ETF (ASX Code: SEMI) offers investors exposure to the world’s leading semiconductor companies, right through the value chain. Demand for semiconductors is being driven by a greater use of electronic devices which includes servers for cloud computing, chips for artificial intelligence and robotics, video game consoles and PCs, and electric cars.
SEMI aims to provide investors with a return, before fees and expenses, that tracks the performance of the Solactive Global Semiconductor 30 Index. The Solactive Global Semiconductor 30 Index contains 30 companies in developed markets, Taiwan and Korea from across the semiconductor value chain. These include: foundries, which make microchips; fabless, which are companies that design microchips; equipment makers, which create the machines used to build microchips; and integrated device manufacturers, which both make and design microchips.
SEMI uses a full-replication strategy to track the index, meaning that it holds all the shares in its index. Its weightings are capped at 10%, meaning each company may take no more than 10% of the portfolio each time the index is rebalanced.
Why consider SEMI
Exposure to many high-growth areas, like cloud computing, self-driving cars, which require semiconductors to operate.
The world’s leading semiconductor businesses, accessed in a single trade.
Diversification through a sector underrepresented in Australia.
Semiconductors, or microchips, are like the brains behind electronic devices. They are in virtually every electronic device in existence: televisions, laptops, phones, microwaves, cars, rice cookers – and the rest. They are so ubiquitous that we usually forget they are there. Semiconductors manipulate the flow of electricity to produce binary computer code. This in turn allows machines and computers to function. The semiconductor industry is a complex and capital-intensive industry with a truly globalised supply chain. It is made up of very large companies that monopolise or oligopolise certain specialised areas. These specialties include foundries, which are companies like Samsung and TSMC that make the microchips. Chip designers, (or “fabless”) like Nvidia and AMD, which create the microchip architecture. And equipment makers, like Lam Research and ASML, that produce the machines that build microchips.
Companies from developed markets, Korea and Taiwan are taken from the FactSet classification system, known as Revere Business Industry Classification System (RBICS). Companies in the semiconductor RBICS industry and its semiconductor equipment and services and semiconductor manufacturing subsectors are eligible for inclusion. To qualify for the index, companies must have a market capitalisation of US$1 billion and a minimum average daily trading value of US$1 million over 3 months (these requirements are lowered for existing constituents at rebalance.) The top 30 companies by market capitalisation are picked, with the weights of each stock capped at 10%.
SEMI uses a capped index methodology, where the largest companies are restricted to taking no more than 10% of the portfolio. At each quarterly rebalance, the biggest companies in the index are sold back down to 10% if their weights have ballooned beyond the set 10% parameter. This weighting methodology is used to prevent the biggest companies – as of July 2021, these are TSMC and Nvidia – from becoming too influential in determining the performance of the fund.
The semiconductor supply chain is truly global, ranging from the US to Europe and Asia. By using SEMI, investors can access this global supply chain in a single trade. This spares them the work and cost of buying a portfolio of global semiconductor stocks individually. It also provides instant diversification and potentially lower risk than buying individual stocks. As SEMI trades on the ASX and is locally domiciled, there is also less paperwork for end investors. Investors will not be required to complete W8BEN forms.
To express long-term strategic or short-term tactical views on the growing demand for microchips. To complement technology sector exposure with tech-aligned companies outside of the GICS classification (the industry sector classification created by MSCI and S&P Dow Jones Indices). To aid portfolio diversification via investment in industries that are largely absent from the Australian market.
We design our ETFs with a view of minimising the amount of overlap between each. In this way, investors who buy more than one of our funds avoid buying the same stocks repeatedly. The precise amount of overlap between each fund can differ as the stocks moving in and out of each ETF change at index rebalance/reconstitution. Whatever overlap exists is usually small. For investors wanting to know the exact quantify of overlap between specific ETFs, please feel free to contact us.