Semiconductors: One of the Biggest Winners of the Huawei Extension

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Days after Trump threatened to cut off Huawei on August 19, 2019, he changed his tune.

In fact, in late August 2019, the Trump Administration extended a reprieve to Huawei, allowing it to buy supplies from US companies so that it can continue servicing existing customers. An extension will renew an agreement set to lapse on August 19, continuing the Chinese company’s ability to maintain existing networks and provide software updates to Huawei handsets, according to Reuters.

This would now extend the agreement another 90 days out to late November 2019.

“There is another 90 days for the U.S. telecom companies, some of the rural companies are dependent on wild ways,” Wilbur Ross said, as quoted by Fox Business. “So, we’re giving them a little more time to wean themselves off.”

All of this follows the Administration’s news that it would delay the 10% tariff on $300 billion worth of consumer goods in what appeared to be a panicked response to the market’s vicious selloff.  Now, instead of going into effect on September 1, 2019, those tariffs won’t start until mid-December if at all at the moment.

One of the biggest beneficiaries of this news is the semiconductor sector.

“We believe the truce sets up improving visibility, a rebound in orders and upside to depressed expectations for the Huawei-exposed semi suppliers in [the second half of 2019,]” Mizuho Securities analysts said, as quoted by CNBC.

While investors can always buy a handful of semiconductor stocks like ON Semiconductor (which was upgraded in August 2019 to a Strong Buy), Qualcomm, Micron Technology, Xilinx, and even shares of Broadcom, there’s a better way to own them all at less cost – ETFs.

In fact, some of the best semiconductor ETFs include:

iShares PHLX Semiconductor ETF (SOXX)

The iShares PHLX Semiconductor ETF seeks to track the investment results of an index composed of U.S. equities in the semiconductor sector.  Some of its top holdings include NVIDIA Corporation, Texas Instruments Inc., Qualcomm Inc. Broadcom, Intel, Applied Material Inc., and Lam Research.  Expense Ratio is 0.46%.

Dynamic Semiconductors Invesco ETF (PSI)

The Invesco Dynamic Semiconductors ETF is based on the Dynamic Semiconductor Intellidex Index. The Intelldiex Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value.  Some of its top holdings include Micron Technology, Applied Materials, and Broadcom.  Expense Ratio is 0.61%.

VanEck Vectors Semiconductor ETF (SMH)

VanEck Vectors Semiconductor ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS US Listed Semiconductor 25 Index (MVSMHTR), which is intended to track the overall performance of companies involved in semiconductor production and equipment.  Some of its top holdings include Intel, NVIDIA Corporation, Applied Materials, and Micron Technology.  Expense Ratio is 0.35%.

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