Strive Asset Management, an ETF issuer focused on “profits over politics”, has introduced a new fund targeting the US semiconductor industry.
China’s invasion of Taiwan would cause severe disruptions to the global supply of semiconductors.
The Strive US Semiconductor ETF (SHOC US) has been listed on NYSE Arca with an expense ratio of 0.40%.
Semiconductors play a critical role across the electronics value chain, and their importance is only expected to grow in an increasingly digital global economy.
As the fourth most-traded product globally – after crude oil, refined oil, and automotive vehicles – semiconductors are core enablers of the data revolution and are at the forefront of many next-generation innovations such as cloud computing, artificial intelligence, robotics, cybersecurity, and autonomous driving.
According to a recent report from McKinsey, global semiconductor demand is estimated to grow by more than 80% by 2030.
Yet, amid this robust demand, the risk of a severe global supply shortage in semiconductors is rising as China increasingly reasserts its claim to Taiwan under its “One China Principle”.
Strive notes that the Chinese Communist Party appears very likely to select Xi Jinping for a third term as China’s leader, breaking the historical two-term chain of succession and making President Xi the longest-serving Chinese ruler since Mao Zedong. The firm believes this increases the risk that China will attempt to annex Taiwan in the near future. As Taiwan is the world’s leading semiconductor provider, responsible for manufacturing 60% of the world’s foundry semiconductors, conflict in the country would exacerbate global semiconductor supply shortages and increase the risk of economic calamity.
The Strive US Semiconductor ETF is linked to the Solactive United States Semiconductors 30 Capped Index which consists of the 30 largest US-listed companies operating in the semiconductor industry. Constituents are weighted by float-adjusted market capitalization subject to a 7.5% cap on any of the five largest companies and a cap of 4.5% on any other firm.
The fund’s broad market exposure makes it very similar to existing US semiconductor ETFs such as the $5.5bn iShares Semiconductor ETF (SOXX US), which also comes with an expense ratio of 0.40%; the $5.4bn VanEck Semiconductor ETF (SMH US), which has an expense ratio of 0.35%; or the $50m Invesco PHLX Semiconductor ETF (SOXQ US), which is the cheapest on the market at 0.19%.
Where Strive aims to stand apart from its competitors, however, is through its unique stewardship approach. The firm will actively vote proxy shares and proactively engage with management teams and boards to mandate the ETF’s underlying companies to prepare for China’s potential annexation of Taiwan by increasing domestic production capabilities.
Vivek Ramaswamy, Executive Chairman and co-Founder of Strive Asset Management, commented: “Our global economy is dependent on access to Taiwanese-produced semiconductors which may effectively go to zero if China escalates its political and military tactics against Taiwan. We think that US semiconductor stocks offer a potential hedge against this risk, especially if US semiconductor companies prepare themselves to fill the supply vacuum created by a potential blockade or invasion of Taiwan. We plan to deliver that message as a shareholder to these companies, unapologetically and without regard to Chinese business interests: unlike many of our larger competitors, Strive does not and will not operate an asset management business in China.”
The fund is the third ETF offering from Strive. Its first two listings include the Strive US Energy ETF (DRLL US), which provides broad exposure to the US energy sector; and the Strive 500 ETF (STRV US), which is positioned as an alternative to S&P 500 funds. Both ETFs also carry the firm’s hallmark anti-ESG disposition.