ETF Securities taps into exciting technology megatrend with launch of ETFS Semiconductor ETF


Evan Metcalf

Leading provider of exchange traded funds, ETF Securities, has launched Australia’s first ETF that gives investors access to the world’s booming semiconductor industry.

ETFS Semiconductor ETF invests in the biggest and most influential semiconductor companies in the world, responsible for bulk of global microchip production.

SEMI tracks the Solactive Global Semiconductor 30 Index, which is a portfolio of 30 companies in developed markets, plus Taiwan and South Korea, which are active across the semiconductor value chain.

ETF Securities Head of Distribution Kanish Chugh says the company is paying close attention to investment themes emerging from megatrends.

“By following megatrends, investors can access high growth opportunities, which are not yet fully captured by conventional sectors or unexpressed by factors. Additionally, they can manage risk by hedging against the disruption that global economic ructions can cause. Correctly identifying and acting on megatrends can offer enormous upside.

“With the rise of thematic ETFs, megatrend investing has become more readily accessible. Semiconductors are a key component that are increasingly underpinning the development of many other megatrend technologies.

“Given this backdrop, we are very excited to launch a series of new ETFs this year that tap into new megatrends. SEMI will be the first of these new ETFs- an Australian first,” says Chugh.

Evan Metcalf, Head of Products at ETF Securities, says: “SEMI fits in our belief that semiconductors are the brains of modern electronics and are an essential part of several megatrends. In many cases, advancements in technology have only been possible due to improvements in semiconductors.”

The coronavirus pandemic has boosted the demand for electronic goods. With more people working, shopping and entertaining themselves from home, electronic devices that enable a remote existence have never been more in-demand. Annual sales growth of semiconductors is forecast to hit a whopping 20% a year in 2021.

There are several exciting newer trends also driving semiconductors, notes Metcalf.

“This includes cryptocurrency,  Artificial Intelligence ( AI) and also video games and cloud computing, given their use in consoles and servers. All of these areas – AI, cloud computing, eSports – are experiencing strong growth, and taking semiconductors with them. But perhaps the most exciting is electric and self-driving cars.”

SEMI provides diversified exposure to the global supply chain, which includes microchip foundries, transistor manufacture, microchip lithography and central processing unit and graphic processing unit assembly.

Stocks included in the portfolio include:

  • Taiwan Semiconductor, the biggest company on the Taiwanese stock exchange and a national champion. It operates the biggest semiconductor foundry in the word.
  • ASML, a Dutch company that makes lithography machines that put transistors onto microchips. It has no substantial competitors and is effectively a monopoly.
  • Nvidia, a US company that makes graphics processing units, or graphics cards, which allow many detailed processes to be run at the same time. The company’s products have emerged from the gaming sector and are now playing a key role in the development of commercial applications for artificial intelligence.

Chugh says a characteristic of the semiconductor industry that has high barriers to entry. Foundries cost billions of dollars to build, often taking several years to complete. Companies must commit to high ongoing research and development spend and they must keep up with constant innovation.

“These characteristics give the stocks in the index wide moats,” Chugh says.

The Solactive Global Semiconductor 30 Index increased by more than 56% over the 12 months to August and is up more than 23% year-to-date.

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