Semiconductor ETFs Battle for Inflows: SOXX vs. SMH

by on July 26, 2013 | ETFs Mentioned:

While overseas demand has increased, the chip industry has yet to fully regain the ground U.S. markets lost during the recent recession. Many of the nation’s chip producers rely on businesses to drive sales, and as technology companies come out of survival mode prospects for producers have improved considerably. Below, we outline two semiconductor ETFs that have been battling for investor attention during the last few trying years: PHLX SOX Semiconductor Sector Index Fund (SOXX, B+) and Market Vectors Semiconductor ETF (SMH, A-) [Download How To Pick The Right ETF Every Time].

Meet the Competitors

Semiconductor Output Will Weigh Heavily On These ETFsHolding between $220.3 million and $240.6 million in total assets under management each, these funds are often in competition for the largest spot in the semiconductor ETF market. SOXX seeks to replicate an index comprised of about 30 different semiconductor manufacturers and the fund consists of some well-known names, such as Intel and Texas Instruments, as well as some smaller companies that probably aren’t on the radar screens of most investors; small and mid cap stocks make up about half the portfolio. SMH also has some large names in its top 10 holdings, and invests in 18 larger market cap semiconductor firms. Originally held by Merrill Lynch, this HOLDERS fund is now managed by Van Eck, and it took a serious expense cut to stay in competition with SOXX [see Semiconductor ETFs Soar On Intel’s Bullish Outlook]

Both funds were hammered in the years following the financial crash, with unprecedented outflows from SMH as it switched issuers, while SOXX saw a huge hit on returns and investors. A number of funds closed during this three-year window, but it is a testament to these funds that they were able to remain in operation [try our Free ETF Head-To-Head Comparison Tool].

The Bottom Line

The surge in sales that has helped lift semiconductors out of the recession is primarily attributed to the world’s emerging markets, where sales for computation and communication devices have been steadily growing. Unfortunately, as these markets start to slip back after exponential growth over the last decade, semiconductor producers will have to hope the recent wave of popularity in tablet computers and smartphones, and the growing domestic economy will replace the losses they will see oversees [also see Emerging Market ETFs: Biggest Winners & Losers YTD].

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Disclosure: No positions at time of writing.