Why Semiconductor ETFs Are Powering Up

After taking its lumps in the economic downturn, the semiconductor sector and related exchange traded funds (ETFs) are seeing some positive developments that could bode well for the coming year.

Global semiconductor sales are growing, thanks to sales of laptops and netbooks. Worldwide, semiconductor sales have increased 5% from July to August. Agam Shah for PC World reports that consumers are finding the lower cost and improved capability of netbooks appealing. While laptop prices have fallen 14% year-over-year, their memory space has increased 25%.

Meanwhile, earnings season should bring more clarity to the future outlook for the sector. Ian Sherr and Clare Baldwin for Reuters reports that investors have faith that Intel (NasdaqGS: INTC) will announce that it had a standout third quarter when it announces earnings on Tuesday. Intel has benefited from growing demand in Asia and other emerging and recovering economies.

Intel is expected to report earnings of 27 cents a share, excluding items, down from 35 cents a year earlier. In August, Intel raised its forecast for third-quarter revenue to between $8.8 billion and $9.2 billion, spurring a rally in tech shares. Intel is considered a general bellwether for this industry.

• Semiconductor HOLDRs (NYSEArca: SMH): up 42.5% year-to-date

• SPDR S&P Semiconductor(NYSEArca: XSD): up 66.2% year-to-date

For more stories about semiconductors, visit our semiconductor category.