China’s latest inflation data shows consumer prices at a three-year high, while producer prices continue to decline. This poses a challenge for global semiconductor investors, as China accounts for one-third of global consumption. Rising internal inflation in China impacts the semiconductor industry worldwide, highlighting the country’s crucial role in the supply chain.

The semiconductor industry relies heavily on China for raw materials and final packaging, making it vulnerable to “exported inflation.” Rising costs of labor, energy, and raw materials in China directly impact chipmakers worldwide, threatening profit margins. Investors may seek de-risked plays in ETFs like PSI, FTXL, and SHOC, which focus more on U.S.-based companies.

China’s inflation surge affects the global semiconductor industry, particularly due to its dominance in rare-earth mining and refining. This reliance on China for essential minerals like dysprosium and gallium poses a risk to chipmakers worldwide. As rising input costs challenge profit margins, strategic semiconductor ETF picks like PSI, FTXL, and SHOC offer a domestic-centric alternative for investors.

Invesco Semiconductors ETF (PSI) provides exposure to 30 U.S. semiconductor companies, including top holdings like Micron Technology and AMD. KLA Corp. has reduced its China revenue share, while AMD is shifting production to the U.S. Amkor Technologies is investing in a new campus in Arizona to enhance the domestic supply chain. PSI has shown strong performance and holds a Zacks ETF Rank #1.

First Trust NASDAQ Semiconductor ETF (FTXL) offers exposure to 31 U.S. semiconductor companies, including top holdings like Micron Technology and KLA Corp. FTXL has seen significant growth and holds a Zacks ETF Rank #2. Strive U.S. Semiconductor ETF (SHOC) provides exposure to 30 semiconductor stocks, with notable holdings like MU and Texas Instruments. Texas Instruments is expanding U.S. manufacturing with a substantial investment in new fabs.

Investors seeking to navigate the semiconductor industry amid China’s inflation surge can consider strategic ETF picks like PSI, FTXL, and SHOC. These funds offer exposure to U.S.-based companies, reducing exposure to Chinese inflation risks. With China’s role in the global semiconductor supply chain, diversifying investments through domestic-centric ETFs can help mitigate risks and capitalize on emerging opportunities.

Read more at Nasdaq: Strategic Semiconductor ETF Picks as China’s Inflation Hits Three-Year High