VanEck Launches China Semiconductor ETF to Expand Investor Access to Domestic Chip Industry Growth

VanEck launched the VanEck China Semiconductor ETF (Nasdaq: SMHC), a strategy designed to give investors pure-play exposure to China's domestic semiconductor industry, a segment of the market that sits outside of conventional semiconductor allocations. SMHC extends VanEck's semiconductor franchise, which includes the VanEck Semiconductor ETF (SMH) and the VanEck Fabless Semiconductor ETF (SMHX).

China's domestic semiconductor industry has become one of the fastest-growing segments of its economy, yet most semiconductor strategies are concentrated in large U.S., Taiwanese and European names across design, fabrication and equipment. The build-out taking shape inside China is being constructed across the entire domestic value chain, reinforced by national policy priority, a captive base of state-directed domestic demand and sovereign capital.

"Most investors think they own semiconductors, but what they own is the incumbent supply chain, concentrated in a handful of U.S., Taiwanese and European leaders," said John Patrick Lee, CFA, Senior Product Manager at VanEck. "China is building a completely separate supply chain, from chip design to manufacturing equipment to advanced packaging, and almost none of those companies appear in a conventional semiconductor or broad China allocation. SMHC is built to close that gap through a single, rules-based, pure-play vehicle."

The investment case does not rest on a single catalyst. Several reinforcing forces are converging: the scale of China's domestic build-out, a national policy mandate for self-sufficiency, state-directed domestic demand, the structural tailwind created by U.S. export controls, and the sovereign capital underwriting all of it.

The build-out is already the largest of its kind by a key measure. In 2025, China was the world's largest spender on semiconductor manufacturing equipment, investing more than any other country or region, a signal of where the industry's physical infrastructure is being built.²

Export controls have reinforced that trajectory rather than slowed it. Since 2019, the U.S. has progressively tightened controls on the technology China can access, yet China's domestic equipment spending has expanded substantially. Every foreign supplier locked out of the Chinese market creates a domestic beneficiary, turning each new restriction into a procurement mandate for a homegrown alternative.

Policy reinforces that demand directly. Beijing has made chip self-sufficiency a national priority and steers purchasing toward domestic suppliers, requiring government bodies, state-owned enterprises, and critical sectors like energy and telecom to favor homegrown alternatives. The result is a captive order book that lets these companies scale before they have to win on global cost or performance.

Underpinning all of it is state financial commitment on a substantial scale, sustained over more than a decade. China's National IC Fund has committed approximately $98 billion across three phases since 2014, with the most recent phase in 2024 committing $47.5 billion to the sector.³

"What makes this compelling is that it's not dependent on a single policy or company," added Lee. "The build-out, the domestic demand and the localization push reinforce each other, and that is what gives the opportunity its staying power."

SMHC tracks the MarketVector™ China Semiconductor 25 Index, a rules-based index built through a disciplined, repeatable process. Included companies must be headquartered or incorporated in China or Hong Kong and derive at least 50% of their revenues from semiconductors or semiconductor equipment. This ensures every constituent is a direct beneficiary of the domestic build-out rather than a diversified conglomerate with incidental chip exposure. The index holds 25 names, weighted by modified free-float market capitalization with position caps, and is rebalanced quarterly.