Global Semiconductor Growth

The semiconductor industry currently experiences a renaissance of growth and innovation. Supply chain shortages guarantee future demand while a cooling US-China trade war sets the stage for a macroeconomic recovery. In such an economic environment, the historically cyclical semiconductor field will prosper. We expect the industry to continue its dominance with double digits growth. This index identifies the strongest innovation drivers within the industrial sector of semiconductors. We seek to diversify across the entire value creation chain of chip production: From semiconductor research, foundries, and equipment manufacturing, to chip designer and product integration. Small positions in related companies might be established in the future. The companies are filtered by an array of financial metrics. Quantitatively, they need to exhibit high sales growth, non-decreasing profit margins, a fair valuation compared to peers, and strong R&D spending growth. Qualitatively, we seek companies with excellent academic management, a robust supply chain, and competitive advantages. We spread the exposure across different markets. While China and Taiwan are the top producers of semis, the US has strong research and is dominant in manufacturing machinery. Lastly, the EU has advantages in niche applications, rounding up the index. For Innovation, size is only of relative importance: We expose investors both to market leaders who succeed at dominating the market, as well as small high growth firms with the potential of disrupting the industry. Many companies lay in between as established mid-large caps with huge potential upside. We actively exclude established companies who failed to innovate and adapt to the markets' fast-changing demands. In our beliefs, these value traps are being disrupted by new players and will not succeed to preserve their dominant position. The investment horizon is longterm (3+ years) as we believe in "time in the market over timing the market".