Juejin Semiconductor ETF: A Guide to Choosing Between Taiwan and US Stocks and Risk Analysis

Why Are Semiconductor ETFs Worth Paying Attention To?

From the popularization of personal computers to the current AI wave, the semiconductor industry plays a central role. Regardless of how technological platforms evolve, they all rely on chips—the “brain” of electronic products. They are responsible for computing, storage, and transmission of information, forming the foundation of modern life across various fields. As AI technology experiences explosive growth, the investment value of the entire semiconductor supply chain continues to rise.

Taiwanese tech stocks account for over 70% of Taiwan’s stock market capitalization, with more than 70% of those related to the semiconductor industry. Investing in semiconductor ETFs has become an important way for many investors to capture industry growth.

What Are the Options for Taiwan Semiconductor ETFs?

The Taiwanese market offers several ETF products tracking the semiconductor sector, each with its own features:

Comprehensive Tech ETFs

• 0050 Yuanta Taiwan 50: Covers the top 50 companies by market cap in Taiwan, with the largest proportion in semiconductors and related industries
• 006208 Fubon Technology: Mainly focuses on Taiwanese tech stocks, including multiple semiconductor manufacturers

Pure Semiconductor ETFs

• 00941 CTBC Upstream Semiconductors: Taiwan’s largest semiconductor ETF, mainly invests in overseas semiconductor materials and equipment companies, with relatively limited growth drivers
• 00891 CTBC Key Semiconductors: Selects 30 listed Taiwanese semiconductor companies, scored comprehensively (market cap + dividend yield + ESG), with individual stock weights not exceeding 20%, offering more stable long-term investment
• 00830 Cathay Fubon Philadelphia Semiconductor: Tracks the Philadelphia Semiconductor Index, covering well-known global semiconductor companies

Among these, 00891 and 00830 are considered better options for Taiwan semiconductor ETFs because they comprehensively cover upstream, midstream, and downstream industries.

Overview of the US Semiconductor ETF Market

The US semiconductor ETF market is much larger than Taiwan’s, with more options. The Philadelphia Semiconductor Index, as one of the four major US indices, attracts many trackers:

• SMH (VanEck Vectors Semiconductor ETF): The largest global semiconductor ETF, tracking the top 25 US semiconductor companies
• SOXX (iShares Semiconductor ETF): An established product since 2001, focusing on US-based semiconductor firms
• XSD (SPDR S&P Semiconductor ETF): Tracks semiconductor stocks within the S&P 500, including small- and mid-cap companies

Core Logic for Choosing Semiconductor ETFs

Index constituent selection approach

Market Cap-Weighted For example, SMH tracks the MVIS US Listed Semiconductor 25 index, following the “big gets bigger” logic. Constituents must generate at least 50% of revenue from semiconductor-related businesses, with individual stock weights capped at 20%, adjusted quarterly. This method benefits from growth of industry leaders (like NVIDIA, TSMC), but also carries concentration risk.

US Domestic Priority SOXX uses free float market cap for stock selection, with a maximum individual stock weight of only 8%. While risk is more diversified, it mainly focuses on US companies, limiting exposure to non-US giants like TSMC and ASML, which have large market caps but are limited in weight. This reflects a long-term expectation of US market leadership.

Equal Weighting XSD employs equal weights across its holdings, mostly small semiconductor firms. The advantage is maximum diversification, but it may lag behind the rally driven by industry giants.

Investment Time Frame and Risk Appetite

Super Long-Term (10+ years): Suitable for free float market cap ETFs (like SOXX), to avoid impact from single stock volatility

Medium-Term Growth (3-10 years): Market cap-weighted ETFs (like SMH) are more likely to benefit from the growth of industry leaders

Short-Term Trading: Consider individual stocks or leveraged instruments, but require risk tolerance

Comparison of the Three Main US Semiconductor ETFs

SMH — The Largest Global Semiconductor ETF

Fundamentals

• Fund Size: $21.9 billion (as of June 2024)
• Tracking Index: MVIS US Listed Semiconductor 25
• Management Fee: 0.35%
• Dividend Frequency: Annual

Holdings Characteristics Top ten holdings include NVIDIA at 24.36% and TSMC at 12.89%, totaling over 37%. Individual stock weight caps at 20%, but NVIDIA has recently hit the cap; next adjustment may require trimming.

Performance 10-year annualized return of 27.32%, outperforming the S&P 500. Over the past 5 years, it has been the best performer among mainstream global semiconductor ETFs.

Risk Warning Over-concentration risk: if NVIDIA or TSMC decline, the ETF will be significantly affected.

SOXX — Veteran Semiconductor Fund

Fundamentals

• Fund Size: $15 billion
• Tracking Index: ICE Semiconductor Index
• Management Fee: 0.35%
• Dividend Frequency: Quarterly

Holdings Characteristics NVIDIA at 10.91%, Broadcom at 8.03%, with relatively even distribution. Non-US giants like TSMC and ASML have large market caps but are limited to about 4% weight since they are not US-listed.

Performance Lagged behind SMH over the past 5 years, mainly because ASML and TSMC performed well but had limited weights, and NVIDIA’s weight was capped at 8%, limiting benefits from its rally.

Advantages Best diversification of individual stock risk, suitable for long-term investors seeking steady returns.

XSD — A Smaller, Niche Choice

Fundamentals

• Fund Size: $1.54 billion
• Tracking Index: S&P Semiconductor Select Industry Index
• Management Fee: 0.35%
• Dividend Frequency: Quarterly

Holdings Characteristics Contains 39 stocks, all equally weighted. The largest, First Solar, has a market cap of about $30 billion, much smaller than NVIDIA. Its performance is driven more by small growth stocks rather than industry giants.

Risk Features Higher volatility, lacking the support of industry leaders, often lagging behind the broader market. Suitable for investors with deep semiconductor industry knowledge and willingness to accept higher risk.

Practical Investment Paths

Account Type Selection

Taiwan Brokerage Accounts

• Pros: Traded in TWD, intuitive operation
• Cons: Higher fees, better for long-term holding

Overseas Online Brokers

• Pros: Low or zero fees; rich tools
• Cons: More complex, requires self-education

Derivative Trading Accounts

• Pros: No trading fees, supports short and long positions, high leverage
• Cons: No actual stock ownership, no dividends or shareholder meetings

Investment Strategy Recommendations

Core Holdings Focus on leading tech companies with stable market positions like TSMC, NVIDIA, ASML. Use ETFs to diversify risk and capture industry growth.

Layered Allocation Based on risk tolerance, allocate among ETFs with different index characteristics. For example, 70% in SMH for industry leaders’ growth, 20% in SOXX for stability, 10% in XSD for small/mid-cap opportunities.

Technical Layout Combine technical analysis to buy at relatively low points and take profits at high points, avoiding chasing highs and selling lows. Also, monitor geopolitical and policy impacts on the industry.

Long-Short Balance For experienced investors, combine long-term ETF holdings with derivatives for short-term trading to improve capital efficiency.

Summary and Outlook

Semiconductor ETFs bundle a basket of listed companies, making them easier to operate and less risky than individual stocks. As AI applications expand and chip demand continues to grow, the semiconductor industry is expected to maintain a long-term upward trend.

Choosing the right semiconductor ETF is not fixed; it should depend on individual investment horizon, risk appetite, and market outlook. If optimistic about the semiconductor industry, starting to allocate now allows assets to participate in this wealth redistribution opportunity, which many investors are pursuing.