Coronavirus Isn’t Stopping Semiconductor Growth, 3 ETFs to Watch

With fourth-quarter earnings in full swing at the same time the coronavirus outbreak is taking hold of the capital markets, it’s allowed investors to see which sectors are pushing through the volatility. One of those has been the semiconductor industry, which in China, forges on despite the rising number of coronavirus cases.

“While most industries have shut down, necessities in the medical, food, and logistics industries have carried on working,” a report noted. “Semiconductors are one of the industries that have carried on production—even in Wuhan itself. There couldn’t be more of a striking example as to how important the semiconductor industry is to the Chinese government. It can’t stop for a week, even for covid-19.”

One of the reasons for their resiliency is because semiconductors must simply move forward—the classic sunken cost fallacy a la economics.

“It may sound crazy to carry on working in Wuhan right now, but shutting down a fab (semiconductor fabrication plant), even temporarily, is very expensive,” the report added. “Fabs usually run 365 days a year. They may sometimes undertake ‘warm’ shutdowns for a few days for maintenance work, but almost never come to a complete stop. In a warm shutdown, the machines are kept on doing dummy runs to keep the equipment stable so production can continue straight away, meaning staff must be on site.”

Here are three ETFs to watch:

VanEck Vectors Semiconductor ETF (NYSEArca: SMH): seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® US Listed Semiconductor 25 Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index. The index includes common stocks and depositary receipts of U.S. exchange-listed companies in the semiconductor industry. Such companies may include medium-capitalization companies and foreign companies that are listed on a U.S. exchange.

iShares PHLX Semiconductor ETF (NasdaqGM: SOXX): seeks to track the investment results of the PHLX Semiconductor Sector Index composed of U.S. equities in the semiconductor sector. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. The underlying index measures the performance of U.S.-traded securities of companies engaged in the semiconductor business.

SPDR S&P Semiconductor ETF (NYSEArca: XSD): seeks to provide investment results that correspond generally to the total return performance of an index derived from the semiconductor segment of a U.S. total market composite index. In seeking to track the performance of the S&P Semiconductor Select Industry Index (the “index”), the fund employs a sampling strategy. The index represents the semiconductors segment of the S&P Total Market Index (“S&P TMI”).

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