What is a Semiconductor Industry ETF

The semiconductor industry ETF is an exchange-traded fund that invests primarily in manufacturers and developers of digital and analog chips.

BREAKING DOWN Semiconductor Industry ETF

The semiconductor industry ETF is part of a larger index that oversees the smaller ETFs of individual chip indexes. This group contains manufacturers of all chip related products, including research and development. Due to the economic significance of semiconductor development, these ETFs serve as a strong indicator of how the United States economy is doing. If prices are high and values are strong, the economy will be in a state of sustained growth. Conversely, a decline in values will indicate that not as much research and development is occurring in the technical sector, pointing towards a stagnating or declining economy. 

In a bull market, semiconductor stocks rank higher as they are tied to development and production in the economy. That is not to say that they are infallible; many have predicted that Silicon Valley will soon experience its own bubble bursting as increasing technological advances slow down. Combined with a growing reliance on foreign production and development, the U.S. could experience a slowing in new technologies being brought to market.

What is Silicon Valley

Silicon Valley is the town in California where many of the greatest U.S. innovations in technology have taken place. The name comes from the numerous creators of silicon chips that call the area south of San Francisco home. These chips are most commonly used in microprocessors, which can be found in almost all computer devices.

In addition to being home to the producers of these devices, Silicon Valley is also home to companies that have made great technological advances. The social media website Facebook considers this area home, as do Apple Computers and Hewlett Packard. Many venture capitalist corporations who invest heavily in these types of companies also live in the Silicon Valley.

Although the area has a geographical significance, the phrase Silicon Valley can sometimes erroneously be applied to the location of any startup company with a focus on technology or area where a cluster of such start-up companies can be found.

Silicon Valley is also the name of a popular show on the Home Box Office Network (HBO) that follows the creators of the fictious start-up called Pied Piper, a Silicon Valley based company. While the show is a work of fiction, it does allude to many companies that exist, including Facebook and Google. The show has been on the air since 2014 and stars Thomas Middleditch, Amanda Crew, Martin Starr and Kumail Nanjiani.