Since 2026, favorable policies for the semiconductor chip industry have continued to emerge. During the Two Sessions, proposals focusing on breakthroughs in core technologies and AI empowerment signaled strong policy support, highlighting the long-term themes of technological innovation and industrial upgrading. Furthermore, on March 11, the Ministry of Industry and Information Technology issued recommendations to mitigate security risks associated with OpenClaw open-source intelligent agents, thereby strengthening safeguards for AI applications in the chip sector. As a core industry underpinning the digital economy and ensuring technological security, and coupled with improving global demand and an accelerated pace of domestic substitution, the semiconductor sector has become a key market focus. The National Semiconductor Chip Index accurately reflects the industry's comprehensive landscape and serves as a tool for capturing its growth benefits.
The index, compiled and published by the National Securities Index Company, is designed to track the performance of listed companies across the entire semiconductor chip industry chain in the A-share market, providing a precise, index-based tool for monitoring the sector. With a base date of December 31, 2002, and a base value of 1,000 points, the index follows a rigorous compilation process involving sample universe definition, liquidity screening, market capitalization ranking, final sample selection, and regular reviews to ensure the selected constituents exhibit strong liquidity, representativeness, and growth potential.
The selection universe includes all eligible A-shares and depositary receipts issued by red-chip companies listed on the Shanghai, Shenzhen, and Beijing Stock Exchanges. Key screening criteria exclude ST and *ST stocks, require a minimum listing period, confirm normal operations without major losses over the past year, ensure no abnormal price fluctuations during the review period, and mandate that the company's core business is focused on the full semiconductor chip industry chain.
The selection methodology employs a dual approach prioritizing liquidity and market capitalization. It first calculates the average daily trading value and average daily total market capitalization of relevant securities, eliminates those with insufficient liquidity, and then selects the top 30 companies by average total market capitalization over the most recent six-month period as index constituents.
The index undergoes semi-annual reviews, implemented on the trading day following the second Friday of June and December each year. Review proposals are typically announced two weeks prior to implementation, ensuring transparency and predictability. During each review, the number of constituent changes is capped at 20% of the total index membership, with clear rules for retaining existing constituents and adding new ones. Additionally, a 5% reserve list of securities is maintained to replace any constituents that become ineligible, ensuring the index remains aligned with industry developments.
For weighting, the index uses the Paasche weighting method and incorporates adjustment factors. Individual constituent weights are capped at 10% at each regular review, and the combined weight of the top five constituents must not exceed 60%. This structure effectively mitigates volatility risks from over-concentration in single stocks while preserving the leading influence of core industry players, achieving a balance between "leadership drive" and "risk diversification."
In terms of size distribution, the index's constituents include large, mid, and small-cap companies, balancing stability and growth potential. As of March 2026, the average free-float market capitalization of index constituents was 45.682 billion yuan, with a median free-float market cap of 28.935 billion yuan. The largest constituent had a free-float market cap of 187.256 billion yuan, while the smallest was 4.128 billion yuan. This diversified size profile allows the index to leverage the operational stability of large leaders to withstand short-term industry fluctuations while capturing the growth opportunities from mid and small-cap companies during industry upgrades, avoiding the limitations of a single size focus.
Regarding weight distribution, the top ten constituents collectively account for 65.38% of the index weight, with the top five making up 48.72%. Both figures remain within the predefined 60% limit, ensuring significant influence from core companies while effectively dispersing single-stock risk. As of March 18, 2026, the top ten constituents by weight were SMIC, Will Semiconductor, NAURA Technology Group, Montage Technology, Gigadevice Semiconductors, Maxscend Microelectronics, Advanced Micro-Fabrication Equipment Inc., JCET Group, Tongfu Microelectronics, and National Silicon Industry Group.
Acting as a barometer for the semiconductor industry, the index's performance is closely tied to industry cycles, characterized by substantial long-term returns, significant short-term volatility, and relatively high fluctuation levels. Its long-term performance has notably outperformed most broad-market and sector indices, reflecting the growth value of the semiconductor industry. As of March 18, 2026, the index had delivered a 34.85% return over the past year, an 18.27% annualized return over three years, and a 9.78% annualized return over five years, demonstrating significant long-term return advantages.
In terms of volatility, the index exhibits higher fluctuation levels than the market average, consistent with the high-growth, high-volatility nature of the semiconductor sector. As of March 18, 2026, its annualized volatility was 33.73% for the past year, 35.13% over three years, and 34.17% over five years.
As a core instrument tracking the index, the Chip ETF uses the index's return rate as its performance benchmark. Its investment objective is to maintain an average daily tracking deviation absolute value of no more than 0.2% and an annual tracking error not exceeding 2%. The top ten constituents are the primary contributors to the ETF's returns. In early trading on March 18, 2026, key performers among the top ten included Gigadevice Semiconductors, which rose 5.18%, Montage Technology, up 4.39%, Piotech, which gained 3.54%, and JCET Group, increasing by 3.52%.
Driven by policy support, demand growth, and technological breakthroughs, the semiconductor industry is transitioning from isolated advancements to coordinated upgrades across the entire value chain. Given the sector's high technical barriers and significant divergence in individual stock performance, the National Semiconductor Chip Index and related ETF products offer a balanced exposure through diversified size and weight distribution, allowing investors to weather industry volatility via core holdings while participating in the sector's overall growth.
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