In the meantime the WSTS (World Semiconductor Trade Statistics) predicts strong demand globally with the market expected to grow by 13.9% in 2022 alone. The global Covid-19 pandemic has been unprecedented and staggering, with semiconductors experiencing both acute shortage and a positive demand across all regions compared to pre-pandemic levels.The purpose of the recently enacted by Congress $52 billion Chips and Science Act is to support the American semiconductor industry, as well as make the country less dependent on chip imports. Its promulgation was carried out with great fanfare by President Biden together with the industry heads with the signing ceremony attended by the CEOs of Intel (INTC) and Micron (MU), and others.

The CHIPS Act aims to make the American semiconductor (often referred to as “chip”) industry less dependent on foreign supplies and more competitive. In this respect, one ETF which has more exposure to semiconductor equipment makers than peers is SOXX.

Many see these companies as the main beneficiaries of chip production physically situated in the U.S. which is likely to shorten the supply chain which stretches to East Asia. In the meantime, it is the semiconductor equipment makers which should gain the most. To this end, one key part of the legislation is investment tax credits, which can equal 25% for a qualified advanced facility a chip manufacturer invests in.

The Act should stimulate investment in the semis sector with one example being the above-mentioned Micron, which recently announced a $40 billion venture to manufacture memory microchips, thereby theoretically increasing U.S. market share from 2% to somewhere near 10%. As for Intel, with its $20 billion project foundry project for manufacturing microprocessors in Ohio, it expects to receive funding in 2023 as it follows the application process for CHIPS money.

There are several private and publicly listed companies that produce chip-making equipment used for lithography, wafer deposition, process diagnostics, assembly, and test systems. One such company which is also held by SOXX is Applied Material (AMAT) which makes equipment for ion implantation, rapid thermal processing, and many other purposes.

Furthermore, the ETF clearly differentiates between equipment makers like Applied Materials and the wider semiconductor sector. It allocates approximately 20% of assets to semiconductor equipment and makes sense for those who do not want to evaluate a plethora of individual stocks, and instead look to benefit from industry strength. This makes the ETF option as opposed to individual stocks more appealing.

Looking for alternatives, there is also Invesco PHLX Semiconductor ETF (SOXQ) which provides exposure to chip equipment makers, but at a slightly lesser extent than SOXX or at 19%.