Earnings Season Drives 4 Chip ETFs

NEW YORK (TheStreet) -- As I explained in yesterday's piece, "Five ETFs to Watch this Week," this week's busy earnings calendar is laden with companies hailing from across the technology industry. I highlighted the iShares Dow Jones U.S. Technology Sector Index Fund (IYW) as a product investors can turn to in order to gain adequate exposure to a number of these companies. However, hands-on investors can also tailor their IT exposure to suit their specific desires through a variety of subsector tech ETFs.

For instance, investors can use ETFs to home in on the semiconductor industry, which will be a major focus of this week's earnings-related press. Texas Instruments ( TXN) kicked things off on Monday and throughout the rest of the week, three other major names hailing from this region of the tech market will follow suit. Companies include Intel ( INTC), Qualcomm ( QCOM), and Advanced Micro Devices ( AMD).

Fellow members of the chipmaker sector, Broadcom ( BRCM), and Nvidia ( NVDA) are slated for late April and May respectively.

Semiconductors have become interesting to watch in recent weeks as market commentators and analysts debate the total impact last month's Pacific earthquake and tsunami will have on production. As these companies report their earnings, investors will want to keep a close eye not only on performance, but guidance for the rest of the year.

Four ETFs stand out for investors looking for direct access to the semiconductor industry. While these funds are all designed to target the same slice of the tech sector, each product uses its own unique strategy that may appeal to different types of investors.

Boasting an average trading volume of more than 10 million, the Semiconductor HOLDRs ( SMH) is the largest and most liquid option. It is important to note, however, that this fund is noticeably top heavy and therefore vulnerable to security-specific risk. Top holdings, Texas Instruments, Intel, and Applied Materials ( AMAT) together account for half of the fund's assets.

The iShares PHLX SOX Semiconductor ETF's ( SOXX) market cap weighted index is considerably less top heavy than SMH, making the fund a safer choice for conservative investors looking for exposure to top names. Like SMH, Texas Instruments, Intel, and Applied Materials are among the fund's largest holdings. However, these firms represent less than 25% of its index. In total, SOXX's ten largest positions account for 58% of its assets.

SPDR S&P Semiconductor ETF ( XSD) and the PowerShares Dynamic Semiconductor Portfolio ( PSI) boast indexing strategies that set them apart from the products listed above.

XSD's index utilizes an equal weight strategy to ensure that industry goliaths do not direct the fund's long-term performance. In fact, the same big names that dominate SMH and SOXX are nowhere to be found among XSD's top holdings. Rather, names at the top of this fund's index include National Semiconductor ( NSM), Intersil ( ISIL), Cavium Networks ( CAVM) and Atmel ( ATML).

Although it is the least traded among these four funds, PowerShares' PSI is one of the more unique options. Rather than following a market cap or equal weighted methodology, according to the fund's website, PSI's index layout is determined by a number of factors such as fundamental growth, stock valuation and timeliness. This has resulted in a unique array that includes a well-balanced collection of large industry leaders and smaller, more volatile members. Top holdings include Altera ( ALTR), TXN, Linear Technology ( LLTC), AMAT, and Maxim Integrated Products ( MXIM).

Earnings season and global factors will inject plenty of hype into the semiconductor sector during the near future. Investors with exposure to any of the funds listed above will have to keep a level head and use caution in order to avoid getting caught up in all of this noise.

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