5 Best Semiconductor ETFs in Canada

Semiconductor ETFs in Canada have become one of the most popular sectors for investors. These components are a major part of our daily electronic accessories and devices. Without semiconductors, the world would not have been able to make technological advancements function today. It’s no longer a surprise that investors are interested in getting involved with the next big thing in technology. In fact, there has been a recent shortage of semiconductors which has brought much attention to the sector. Investing in semiconductors has since become a rewarding opportunity for investors. In this article, we will mention the top semiconductor ETFs in Canada and some of the features of each of them. Keep reading to learn more!

semiconductor etfs

What is a semiconductor ETF?

Before we go ahead to discuss semiconductor ETFs, it’s helpful to understand what a semiconductor is exactly. After all, investors should be aware of what they’re investing in! Semiconductor devices display different useful features, such as passing current from one direction to the other, showing variable resistance, and reacting to light and heat. The primary functions of a semiconductor device include signal amplification, switching, and energy conversion. It is an absolute medium to control appliances and varying electrical currents under certain conditions.

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Up to $6.95 per online stock or ETF trade. Plus, there’s no minimum account balance.

An exchange-traded fund (ETF) is an investment security that combines securities to track the performance of a benchmark index. However, a semiconductor ETF is an exchange-traded fund that invests in securities in the semiconductor production and distribution sector.

The demand for semiconductors can affect ETF performance and has been proven to be in high demand for driving AI technology. When the demand for semiconductors is high, the prices of semiconductor stocks will most likely increase. This is because companies in the semiconductor sector can only charge higher prices for their products when demand is high. As mentioned, there’s been a recent shortage in semiconductors which has naturally driven the demand and price.

Semiconductor ETFs offer more benefits than investing in individual stocks and securities. However, when researching ETFs, investors may want to consider long-term performance, objectives, ratings, and expenses. Below are some of the benefits of investing in semiconductor ETFs in Canada.

Benefits of Semiconductor ETFs

  • Diversification: Semiconductor ETFs provide exposure to several companies involved in the design, production, or distribution of semiconductors. As an investor, this will help to reduce risk, as you will be investing in more than one company. 
  • Liquidity: Semiconductor ETFs are traded on major exchange platforms. It makes them easy to purchase and sell. Investing in semiconductor ETFs will ensure you can access your money easily.
  • Potential for High Returns: As a continuously growing industry, the semiconductor industry goes through several high and low periods of investment. However, the primary goal of the semiconductor industry is growth, and this can produce high returns for investors who invest in semiconductor ETFs. 
  • Low Costs: Semiconductor ETFs usually come with low fees compared to actively managed funds. This can also help to increase your investment returns. 

Related Reading: Types of ETFs in Canada

5 Best Semiconductor ETFs in Canada

There are not many semiconductor ETFs exclusive in Canada. However, the following ETFs have unique features and are well-ranked.

TickerExpense RatioStock PriceYTD Return
All information correct as of October 2023.

Related Reading: 5 Best Money Market ETFs in Canada

CIBC Investor’s Line Offer

Up to $6.95 per online stock or ETF trade. Plus, there’s no minimum account balance.

1. Horizons Global Semiconductor Index ETF (CHPS)

CHPS is Canada’s first ETF that most semiconductor companies use to manufacture processing chips in electronic devices. The ETF tracks the Solactive Capped Global Semiconductor Index. The fund is very popular in Canada and has a high asset allocation to US companies. It is relatively small and only has $47M in assets under management (AUM). 

The ETF actively hedges the US dollar value of its portfolio against the Canadian dollar at all times. CHPS is a bad choice for investors looking for income as one should not expect a yield as each year comes. However, it is a great way to access the semiconductor sector as an investor in Canada.

This Canadian ETF option is currently available on the Toronto Stock Exchange and holds 56 companies, including NVIDIA Corp (NVDA), Broadcom Inc. (AVGO), and Taiwan Semiconductor Manufacturing Co Ltd., (TSM). These are the most prominent semiconductor stock companies globally. 

2. SPDR S&P Semiconductor ETF (XSD)

XSD is another prevalent ETF that has a mix of various stock holdings than CHPS. The largest holding in XSD is a mid-cap semiconductor stock, Rambus Inc., which makes up to 4% of the fund. The ETF tracks the S&P Semiconductor Select Industry Index. Since 2006, it has been recorded that XSD has $1.4B in AUM and has accumulated years of rock-solid performance.

Unlike CHPS, XSD is not protected against the loss of the Canadian dollar, so you will have to purchase it on the US side of your investment accounts. Any change in currency between the Canadian dollar and the US dollar will affect your percentage of total return.

When it comes to US exposure, this is the heaviest-weighted fund on the list. This is because 93% of its assets are invested in US-based semiconductor companies. Examples of these companies are Intel Corporation (INTC), AMD (AMD), and Broadcom Inc (AVGO).

3. VanEck Semiconductor ETF (SMH)

SMH is one of the most traded semiconductor ETFs on exchange platforms in the US. The ETF currently has an average daily trading volume of 4 million shares and more. It tracks the MVISUS Listed Semiconductor Index and also has a long performance track record as XSD.

The ETF is very large and has an average MER for a global stock ETF. It is very concentrated and currently has 25 stock holdings in its portfolio. Like CHPS, the largest weighted stocks in SMH are NVIDIA Corp (NVDA), Taiwan Semiconductor Manufacturing Co Ltd ADR (TSM), and ASML Holding Nv (ASML).

Since SMH trades on the NASDAQ exchange, interested investors will have to purchase it in US dollars on the US side of their investment accounts. SMH has long remained one of the best semiconductor ETFs to add to your portfolio.

Related Reading: How to Invest in Index Funds in Canada

4. iShares Semiconductor ETF (SOXX)

SOXX, yet another massive ETF on the US list, tracks the ICE Semiconductor Index. The ETF is much larger than CHPS and XSD, with an AUM of about $7B. It currently has approximately 30 stock holdings in NVIDIA Corp (NVDA), Broadcom Inc (AVGO), and Texas Instrument Inc (TXN). 

SOXX also has one of the longest performance track records on the list. Just like SMH, this ETF pays a reasonable dividend yield and pays out distributions every quarter. It can be purchased in US dollars, but your total return will be affected by changes between the US and Canadian dollars.

Unlike SMH, SOXX does come with a better measure of MER, making it not the best US-listed option for adding semiconductor exposure. It is most suitable for those looking to get maximum returns. Moreover, if you are looking for a semiconductor ETF that primarily focuses on US-based semiconductor stocks, choose this one.

5. Invesco PHLX Semiconductor ETF (SOXQ)

SOXQ is another ETF that tracks the PHLX Semiconductor Sector Index. It invests in the 30 largest US companies involved in the semiconductor sector. Compared to other US-listed ETFs in this article, SOXQ is very small in size. It pays a good percentage of dividend yield and offers distributions every quarter.

The ETF has a very short performance track record and can be purchased in US dollars on the US side of your investment accounts. When compared to other ETFs in the list, SOXQ is offered at a significantly lower MER.

What is the largest semiconductor ETF?

The largest US-listed semiconductor ETF is the VanEck Semiconductor ETF with a record of $10.76 billion in assets. It tracks the performance of the MVIS US Listed Semiconductor Index. This is a stock market index of one of the largest semiconductor companies, NVIDIA Corporation (NVDA).  

CIBC Investor’s Line Offer

Up to $6.95 per online stock or ETF trade. Plus, there’s no minimum account balance.

What’s the best semiconductor ETF?

The best semiconductor ETF is the Horizons Global Semiconductor Index ETF (CHPS). It is the only Canadian fund that is offered in Canadian dollars. With CHPS, you can add semiconductor exposure to your Canadian dollar investment accounts. It is typically used to track the performance of some of the largest and most liquid US exchange-listed companies in the semiconductor industry.

Related Reading: 10 Best Mutual Funds in Canada

Are semiconductor ETFs a good investment?

It’s no surprise that the semiconductor industry is significantly growing at a fast pace, especially with the introduction of AI technology. Investors should be prepared for short-term price fluctuations before embarking on a high-growth ETF investment journey. 

Semiconductor ETFs are usually traded on major exchanges, making them easy to buy and sell. With good trading experience and a high tolerance for risk, an investor can confidently enter any position of their choice.  

As with any investment decision, it’s wise to conduct thorough research and evaluate your risk tolerance. Take time to consider your investment goals before investing in any semiconductor ETFs in Canada.

Read More: Bond ETF vs Stock ETF: Which is better?

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