The SOXX (iShares Semiconductor ETF) and SMH (VanEck Semiconductor ETF) are two well-known semiconductor-focused ETFs. Trying to figure out what the difference is between the two?

I dive into the details below, but two key points stand out: There are 23 common holdings between the two funds and these holdings account for around 71% of the weight in the two funds.

Can the balance of the holdings make all the difference? Let’s find out.

Before proceeding further, I just wanted to point out that this analysis has been greatly simplified by the dedicated tool that we developed inhouse: dfin.pro. It’s free to use and has plenty of detailed information and analytics of different ETFs – including a free tool to make it easy to compare multiple ETFs.

Mandate and Underlying Index

SOXX tracks the investment results of the ICE Semiconductor Index, which measures the performance of the equity securities of the 30 largest US-listed companies. Note that “US-listed” is different from “US-based”. Many foreign-based companies are listed on US stock exchanges, so you could still end up owning international companies in this case.

SOXX used to track the Philadelphia Semiconductor Index however they have switched over to tracking the ICE Semi index in 2022.

Companies classified within the semiconductors industry include companies that either manufacture semiconductors to be used in electronic applications or utilize LED and OLED display technology. The semiconductor industry also includes companies that provide services or equipment associated with semiconductor design and manufacturing.

SMH tracks the MVIS (MarketVectors Indexes) US Listed Semiconductor 25 Index, which is intended to track the overall performance of companies involved in semiconductor production and equipment. The index is a modified market cap-weighted index, and only includes companies that generate at least 50% of their revenue from semiconductors or semiconductor equipment.

Holdings

Top 10 Holdings

Based on the underlying indices, the difference at the outset is in the number of holdings: SOXX has 30 vs SMH’s 25. The top 10-holdings for the two funds and their cumulative weight is presented in the table below:

As of writing this note, the top-10 holdings in SOXX accounted for 60% of the holdings whereas it amounted to around 72% in SMH.

As you can see, there is a strong overlap between the holdings, although the weightings for the individual names are different. The biggest standout difference for me is that SMH has a very high weight in Nvidia. which makes it their top holding. SOXX holds it as well, but at a slightly lower weight. The same is true for TSMC as well.

For full list of the overlapping holdings and their current weights, please see the holdings overlap analysis on dfin.pro.

Unique Names

As I mentioned earlier, there are 23 names that overlap between the two funds. As SOXX holds 30 companies, that means SOXX has 7 unique names. Similarly, as SMH can hold 25 names, SMH has 2 unique names.

Some of the key differences include Synopsys, Cadence, Lattice Semiconductor, and MKs Instruments. So there’s another big difference between the two funds: SMH brings in a slight exposure to software, whereas SOXX is all about the hardware.

SMH has two sizeable positions in Synopsys and Cadence. Both these companies provide software and services that are used in the design of semiconductor products. On the other hand, SOXX has allocated their 8.2% of unique names to mostly actual designers, vendors, and producers of semiconductors.

Geographic Allocation

The geographic breakdown of the funds is close, but not the same. The two key differences for me are:

1. US weight of nearly 86% in SOXX vs 80% in SMH. SMH allocates the rest to higher weights in other countries such as Taiwan and Netherlands.
2. Taiwan weight of only 5% in SOXX vs 13% in SMH

It’s important to remember that the semiconductor industry is unique because although it is globalized, it is also highly integrated. The production chain for semiconductors stretches over many countries: An Intel chip might be designed in India and manufactured in the US! Similarly, an Nvidia chip might be designed in the US and manufactured in Taiwan or South Korea. The suppliers for these fabs might be based in the Netherlands, the US, and Japan.

For these reasons, the country exposure is not as relevant in this case as it might be in other sectors. Chip stocks typically rise and fall based on the outlook for the end demand for semiconductors (on a global basis), the supply situation for these chips, and competitive dynamics.

However, the only reason I call out Taiwan specifically is because of the obvious risk of a China-Taiwan conflict. If there were ever to be a war between the two countries, SMH has a slightly higher downside risk as their weight in Taiwan is much higher.

It’s also important to contextualize this: in the event that the war actually does take place, global markets will be down significantly anyways; so a 6% weighting difference to Taiwan between the two funds will not be a huge differentiator of your portfolio returns – everything will be down!

Performance

Given the heavy overlap between the holdings of the two funds, their performance used to be virtually the same. However as Nvidia has rallied substantially in the last 2 years, the performance gap between the two ETFs has really opened up. The table below shows the annualized returns over the last 1, 3, 5, and 10 year periods:

To look at this graphically, I have shown the comparison charts for the 10 year period below.

To put the performance of the semiconductor stocks in context, let’s take a look at the chart showing the total returns for SMH and SOXX compared to the S&P500. I’ve used VOO as the proxy ETF here for the S&P500.

Over the last 10 years, the S&P500 has delivered a cumulative return of 259% compared to 689% for SOXX and 884% for SMH. Quite the outperformance for the semi stocks!

Expense Ratios

Both funds now have the same expense ratio of 0.35%. This is quite low and very reasonable.

Fund Size & Liquidity

As of early 2025, SOXX has around $14 billion in assets and the SMH has grown to $21 billion in assets.

SMH’s average trading volume of 7.6 million shares also comfortably outpaces SOXX’s 3.6 million. Regardless though, for retail investors, the volume in both funds is sufficient to

Looking Ahead

In investing, the future matters much more than the past. We’ve had a big market correction in January 2025 as DeepSeek has rattled the AI stocks.

So now it’s important to understand what can happen in the future. There are two ways to think about this question: 1) What will lead to SOXX or SMH performance diverging in the future? 2) What is the outlook for semiconductor stocks in general?

Potential Sources for Divergence in Performance

Thinking about divergences in the future, there are two points that come to my mind, but both are not likely to be huge differentiators:

1. Nvidia exposure: It’s clear that Nvidia is the main performance differentiator between SMH and SOXX as there’s a huge difference in weight. Combined with the other semicap exposed stocks, SMH’s future will be much more tied to a return in belief in the AI capex story. TSMC of course produces chips for Nvidia. Given the size of the latter, TSMC’s share price will of course have a very high correlation with that of Nvidia.
2. Taiwan Exposure: As I already discussed, the exposure to Taiwan is around 8 percentage points higher in SMH vs SOXX, so in the event of a conflict, SMH may underperform the SOXX slightly. But both ETFs (along with the market) are likely to get hammered anyways.

Outlook for Semiconductor Stocks

It’s always difficult to make short-term or even medium-term predictions on the direction of the market, so I will refrain from doing that here. What I will say however, for the reasons outlined in the section further below, is that the long-term outlook for the semiconductor industry is solid.

There are very few industries that consistently grow at this pace and therefore it makes sense for investors to have solid exposure to this industry. And especially now, when the market is in a correction, you can buy this sector at a very nice discount to its fair value!

If you already have big exposure to this space and are panicking, do not sell based on an emotional response! Take a breather and do your due diligence before choosing the next course of action.

Which ETF is better SOXX or SMH?

Both ETFs share a great deal of similarity – and indeed did had similar performance until 2024. The key differentiator now between the two is SMH’s higher holdings in companies like Nvidia and TSMC. Going forward, SMH’s returns will therefore be tied more to the performance of those two companies.

On other metrics, the two funds are either largely similar (expense ratio, dividend yield), or the difference is irrelevant to almost all retail investors (AUM, trading value).

So which one is better? If you prefer slightly more diversification, then SOXX is better. If you want to hitch your wagon to Nvidia and TSMC (more so than with SOXX), then SMH will be better for you.

Given our bullish long-term view on semiconductors, if held for the long-term, I think both have a high chance of outperforming the S&P 500 over a 5+ year time horizon.

Why Invest in the Semiconductor Industry?

What are Semiconductors?

Semiconductors are materials that have been specifically designed to be used in electronic devices and circuits. They are made of materials like carbon, silicon, germanium, and silicon-germanium, which have been carefully processed to create materials with unique electrical properties. The materials are used in electronic devices to create rectifiers, transistors, and diodes, which form the most basic element of electronic circuitry.

As the name implies, semiconductors – sometimes conduct (or carry) electricity and sometimes they don’t. This effectively allows them to operate as a switch in digital circuits – which allows them to generate the 1’s and 0’s that we associate with digital devices.

The various basic elements (typically a transistor) is what forms the basis of the modern chips or integrated circuits (ICs). Integrated circuits are the heart of modern electronics, and without them, we would not have the amazing computing power that we do today. Semiconductors are an essential component of electronic devices like computers, cell phones, and solar panels. Without them, these devices would not function.

Why are Semiconductors Important?

It goes without saying that the world without electronics and digital products would look very different. Digital devices and products are present in almost every single device today, and this continues unabated. Even toasters now connect to WiFi – and they need multiple chips too!

Even within devices, the complexity rises as the functionality of each device continues to grow. Today’s smartphones are just as powerful as computers from less than 5 years ago. Computer chips, with increasing amounts of processing power, continue to cram in more and more transistors.

Without the increasing complexity and pervasiveness of semiconductors, it would not be possible to have the level of functionality today that we take for granted. Trends such as artificial intelligence, robotics, 5G, internet of things, autonomous driving, mobile communication, etc. will continue to demand an increasing amount of digital

And ultimately, these technological trends are not just fads, they are important life-saving and productivity-improving tools. Consider some example:

• MRI scanners with built-in AI can help a radiologist dramatically improve the speed and quality of diagnosis.
• Robots can perform dangerous tasks which might be unsafe for humans. Alternatively, they can simply help fill in a labour gap, especially in developed nations.
• Autonomous driving and driver assistance features can help reduce the frequency and severity of vehicle accidents.
• Smartphones and the internet have helped increase accessibility to information, allowing a democratized creator based economy!

The list is endless, and I think mostly everyone is familiar with the positive ramifications of technology!

Growth Rate in the Semiconductor Industry

As this slide from ASML shows, the market size of the semiconductor industry is growing dramatically in just the space of this decade. By 2030, the market size of the industry is expected to be three times what it was in 2020! On a combined basis, sales of the semiconductor industry are expected to exceed $1 trillion by 2030.

Typically I am skeptical of such rosy projections, but given the increasing trends towards digitization, I am willing to go along with some of these figures.

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