VanEck Launches SMHX: Targeted Exposure To Fabless Semiconductor Designers

Rhea-AI Summary

VanEck has launched the VanEck Fabless Semiconductor ETF (SMHX), targeting companies that design chips but outsource manufacturing. This ETF complements VanEck's existing $23 billion Semiconductor ETF (SMH). SMHX focuses on fabless semiconductor companies that allocate more resources to innovation and R&D, avoiding high manufacturing costs.

SMHX tracks the MarketVector™ US Listed Fabless Semiconductor Index (MVSMHX), including companies with at least 50% of revenues from fabless semiconductor business. The fund aims to capitalize on the CHIPS Act and increasing demand for semiconductors in AI and other technologies. VanEck positions SMHX as an opportunity for investors focused on innovation and R&D in the semiconductor industry.

Positive

• Launch of new ETF (SMHX) targeting high-growth fabless semiconductor sector
• Complements existing $23 billion Semiconductor ETF (SMH), expanding VanEck's thematic offerings
• Focuses on companies with lower manufacturing costs and higher R&D investment
• Potential to benefit from CHIPS Act and increased demand in AI and emerging technologies

Negative

• None.

Insights

Market Research Analyst

The launch of VanEck's SMHX ETF represents a strategic move in the evolving semiconductor landscape. This ETF's focus on fabless companies aligns with the industry's shift towards specialization and agility. By targeting firms that prioritize design and R&D, SMHX offers investors exposure to potentially high-growth segments of the semiconductor market.

The timing is noteworthy, coinciding with increased demand driven by AI advancements and supported by the CHIPS Act. While the Act primarily boosts manufacturing, it indirectly benefits fabless companies by strengthening their ecosystem. This could lead to enhanced innovation and faster market adaptation for fabless firms.

However, investors should consider that fabless companies may face supply chain risks and potential challenges in scaling production during high-demand periods. The ETF's performance will likely be closely tied to technological advancements and market demand for specialized chips, making it a potentially volatile but high-potential investment in the semiconductor space.

Financial Analyst

The introduction of SMHX alongside the existing $23 billion SMH ETF demonstrates VanEck's commitment to providing diverse semiconductor investment options. This new ETF offers a more focused play on the design and innovation side of the semiconductor industry, which could appeal to investors seeking exposure to the sector's growth potential without the capital-intensive aspects of manufacturing.

Financially, fabless companies often have higher profit margins and return on invested capital due to their asset-light business model. This could translate to potentially stronger financial performance in favorable market conditions. However, it's important to note that the fabless model also comes with increased dependency on third-party manufacturers, which could impact profitability during supply chain disruptions or capacity constraints.

For investors, SMHX provides an opportunity to diversify within the semiconductor sector, potentially balancing out risks associated with integrated manufacturers. The ETF's performance will likely be closely tied to technological innovation cycles and demand for specialized chips in emerging technologies like AI and IoT.

SMHX targets fabless semiconductor companies that focus on design and R&D rather than manufacturing, and builds on VanEck’s suite of thematic equity ETFs, which includes the $23 billion VanEck Semiconductor ETF (SMH).

Fabless chip companies avoid the high costs of owning manufacturing facilities and can deploy more resources towards innovation, making them well-equipped to adapt to new technologies, market demands, and scaling needs.

NEW YORK--(BUSINESS WIRE)-- VanEck is today announcing the newest addition to its suite of thematic equity ETFs: the VanEck Fabless Semiconductor ETF (SMHX), targeting semiconductor companies that design and develop chips but outsource their manufacturing.

Unlike integrated chip manufacturers, fabless companies focus solely on chip design and development and outsource their production. This approach allows them to avoid the high costs of owning manufacturing facilities, allocating resources instead to invest heavily in research & development and respond more quickly to technological advances and changing market dynamics.

SMHX joins a VanEck thematic ETF lineup that already includes the VanEck Semiconductor ETF (SMH), a $23 billion fund that is designed to provide exposure to the performance of the largest and most liquid companies in the global semiconductor industry, regardless of whether they operate as fabless or integrated organizations.

“The global semiconductor space has been going through a transformational period in recent years, as demand has spiked alongside advancements in generative AI and other fast-moving technologies. Despite recent volatility, there remain a number of tailwinds for the industry, including the CHIPS Act,” said Nicholas Frasse, Associate Product Manager with VanEck. “While the Act is primarily aimed at increasing manufacturing capacity in the U.S., it bolsters the ecosystem fabless companies rely on. With their leaner operations and focus on R&D, companies that take a fabless approach are well-positioned to benefit from the enhanced manufacturing incentives, driving further innovation and gaining deployment capabilities. That’s why we’re very pleased to be making SMHX available to investors alongside SMH and our other thematic offerings.”

SMHX seeks to track, before fees and expenses, the performance of the MarketVector™ US Listed Fabless Semiconductor Index (MVSMHX), which is designed to track the overall performance of fabless companies in the semiconductor industry. To be eligible for inclusion, companies must be pure play in nature, generating at least 50% of their revenues from fabless semiconductor business lines.

“For investors who are more focused on innovation than vertical integration and on R&D spending as opposed to manufacturing, SMHX could be an important part of a diversified equity portfolio. We look forward to further educating all types of investors about the role fabless chip designers are playing in the powerful technological changes of the past few years and the advancements still to come,” added Frasse.

VanEck regularly publishes research and insights around the semiconductor space and other key thematic areas, most recently providing an overview of fabless semiconductor companies “in the CHIPS Act Era.”

About VanEck

VanEck has a history of looking beyond the financial markets to identify trends that are likely to create impactful investment opportunities. We were one of the first U.S. asset managers to offer investors access to international markets. This set the tone for the firm’s drive to identify asset classes and trends – including gold investing in 1968, emerging markets in 1993, and exchange traded funds in 2006 – that subsequently shaped the investment management industry.

Today, VanEck offers active and passive strategies with compelling exposures supported by well-designed investment processes. As of July 31, 2024, VanEck managed approximately $111 billion in assets, including mutual funds, ETFs and institutional accounts. The firm’s capabilities range from core investment opportunities to more specialized exposures to enhance portfolio diversification. Our actively managed strategies are fueled by in-depth, bottom-up research and security selection from portfolio managers with direct experience in the sectors and regions in which they invest. Investability, liquidity, diversity, and transparency are key to the experienced decision-making around market and index selection underlying VanEck’s passive strategies.

Since our founding in 1955, putting our clients’ interests first, in all market environments, has been at the heart of the firm’s mission.

Disclosures

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.

An investment in the VanEck Semiconductor ETF (SMH) and VanEck Fabless Semiconductor ETF (SMHX) may be subject to risks which include, among others, risks related to investing in the semiconductor industry, special risk considerations of investing in Taiwanese issuers, information technology sector, equity securities, small-, medium and large-capitalization companies, foreign securities, emerging market issuers, foreign currency, depositary receipts, issuer-specific changes, market, operational, index tracking, authorized participant concentration, new fund, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified, and index-related concentration risks, all of which may adversely affect the Fund. Small, medium and large-capitalization companies may be subject to elevated risks. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation
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Phone: 800.826.2333
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Media

Chris Sullivan

Craft & Capital

917.902.0617

chris@craftandcapital.com

Source: VanEck

FAQ

What is the ticker symbol for VanEck's new Fabless Semiconductor ETF?

The ticker symbol for VanEck's new Fabless Semiconductor ETF is SMHX.

What index does the VanEck Fabless Semiconductor ETF (SMHX) track?

SMHX tracks the MarketVector™ US Listed Fabless Semiconductor Index (MVSMHX).

How does SMHX differ from VanEck's existing Semiconductor ETF (SMH)?

SMHX focuses specifically on fabless semiconductor companies that design chips but outsource manufacturing, while SMH provides exposure to the broader semiconductor industry, including both fabless and integrated manufacturers.

What percentage of revenue must companies generate from fabless semiconductor business to be included in SMHX?

Companies must generate at least 50% of their revenues from fabless semiconductor business lines to be eligible for inclusion in SMHX.