VanEck Senior Product Manager John Patrick Lee stated that U.S. institutional investors are beginning to position themselves in China's semiconductor sector, with the earliest possible inclusion of Cxmt Corporation into a VanEck ETF by the end of September.
Founded in 1955 and headquartered in New York, VanEck is a global asset manager owned by a founding family, with offices in New York, Shanghai, Frankfurt, Zurich, Amsterdam, London, and Sydney. Its product lineup includes ETFs, mutual funds, and separately managed accounts. In China, it operates VanEck Private Fund Management (Shanghai) Co., Ltd. As of June 30, 2026, VanEck managed approximately $237.4 billion in assets globally. It manages the world's largest semiconductor ETF, SMH, which had total net assets of around $700 billion as of early August. In June, VanEck launched SMHC, the first U.S.-focused ETF targeting China's semiconductor industry.
Lee noted that U.S. investors find it challenging to access Chinese semiconductor companies. In U.S.-listed China-focused funds, whether broad-based or tech-focused, the largest weights lean toward software companies like Tencent, Alibaba, JD.com, and Pinduoduo. Even if semiconductor firms are included, their representation is minimal. Lee sees this as a rare opportunity, describing the current phase as foundational work, educating investors on the excitement of this opportunity. He emphasized that China is building its entire semiconductor industry from scratch, a stark departure from traditional models, and its market is rapidly catching up to global leaders.
Upon SMHC's launch, approximately $200 million flowed in quickly, followed by some outflows as market sentiment shifted. Lee believes the buyers are primarily institutions and registered investment advisors (RIAs), not retail investors. Institutions seek diversification and a unique angle to participate in the semiconductor space.
Observing U.S.-listed China-focused ETFs, inflows are concentrating on technology. Previously, internet companies were the top choice for global investors, with the largest China ETF being KWEB, but this trend is shifting. Lee cited VanEck's CNXT ETF, tracking the ChiNext index, which saw strong inflows this year. Similarly, VanEck's ETF focused on the STAR Market attracted significant overseas capital. He noted that investors are chasing the "China Innovation" theme rather than broad beta or internet plays. Lee believes China's innovation tailwinds are numerous, spanning semiconductors, electric vehicles, batteries, precision manufacturing, and robotics. Policy support and a preference for "buy local, buy domestic" are favorable factors. While no sector can rise indefinitely and needs breathing room, he stressed these areas have structural support.
Lee explained that SMHC is a passively managed index-tracking ETF. Stock inclusions or exclusions are determined by the index provider, which rebalances quarterly and reconstitutes semiannually. The former adjusts portfolio weights, while the latter defines the investment universe and decides whether to add new stocks. "Whether Cxmt Corporation enters the ETF is up to the index," Lee said. The index's next rebalancing is due at the end of September, during which reconstitution will occur. "Thus, Cxmt Corporation could be included in the ETF at that time, with a significant weight in the index." The underlying index of SMHC aims to identify the top 25 Chinese semiconductor companies, weighted by market cap.
Discussing recent semiconductor sector volatility, Lee attributed it to multiple factors: sharp pullbacks in SK Hynix and Samsung stocks driving memory chip trends, rapid valuation expansion of related stocks, Federal Reserve rate hike expectations, and profit-taking after two years of outperformance by emerging markets over the U.S. "This doesn't mean the China semiconductor trade is over," he said. In South Korea, after leveraged ETF positions were liquidated, the market is establishing a new baseline. "The dust is still settling," making it difficult to determine if the sell-off in Korean semiconductors is finished. "After two consecutive years of straight-line gains, the previous trend is unsustainable," he noted. However, Lee is unequivocal about the AI chip and memory theme: "100 percent, this story is not over. Whether the story translates into stunning stock performance is another matter."
In his view, holders of SMHC, the China-focused semiconductor ETF, will remain predominantly institutional for now. Nevertheless, awareness is spreading: "The listing of Cxmt Corporation has made global headlines, signaling that it is becoming familiar to the general public beyond institutions."
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