China Semiconductors: The Investment Gap
September 01, 2026
Watch Time 2:05 MIN
JP Lee explains why China's semiconductor boom — driven by US export controls and government policy — creates a portfolio gap that SMHC is built to fill.
In 2025, China spent more money than any other country on semiconductor manufacturing equipment. That's not on semiconductors themselves. It's on the machines, equipment, buildings, and resources which are going to fuel their AI, tech, and automation build-out over the next decade. Now that's a huge deal when you consider how much money the US is spending and how much money the rest of the world is spending on the same area.
China's Policy Tailwinds
The policy tailwinds are very real. The Chinese government is supporting the semiconductor industry by forcing local companies in certain industries to buy local semiconductors. So if you are a telecom company in China, you have to buy local. They're also providing a lot of funding, grants, and tax incentives for these companies as they build out their manufacturing base.
In many ways, this build out is being forced on China by pressure from the United States. US export controls since 2019 have accelerated local Chinese domestic demand and production. The way to think about it is the United States will not allow its top semiconductor companies to sell their best chips to China. And what this does is forces China to look inward, to build with themselves, and to build towards their own future.
SMHC Fills the Gap Where Existing Funds Fall Short
In the US, existing semiconductor strategies are really focused on the traditional names that you all know AMD, Nvidia, ASML, and the like.
And then if you were to look towards the funds that are focused on China, those funds and strategies are typically focused mostly on the big internet names like Alibaba and Tencent.
So what we have here is a gap in the marketplace that the VanEck China Semiconductor ETF is trying to fill.
SMHC | VanEck China Semiconductor ETF
SMHC closes that gap. And what we've done is taken the same basic rules from a passive index perspective that we use for SMH and apply it to a different universe. So if you're looking for a way to get access to a new segment of the semiconductor market that you do not have, SMHC is a good place to look.
IMPORTANT DISCLOSURES
Source: SEMI, Data as of April 2026.
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MarketVector China Semiconductor 25 Index intends to track the performance of 25 of the largest and most liquid Chinese companies in the semiconductor industry.
MVIS® US Listed Semiconductor 25 Index (MVSMHTR), which is intended to track the overall performance of companies involved in semiconductor production and equipment.
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