Published on: 2026-09-15
AIFR concentrates on companies with significant semiconductor manufacturing businesses, leaving fabless names such as Nvidia and Broadcom outside the portfolio. Its largest exposures include TSMC, Samsung Electronics, Intel and UMC. The eye-catching mismatch sits with TSMC, which generated 72.5% of global foundry revenue in Q2 2026 yet represents only around one-fifth of the index.
AIFR tracks the MarketVector Global Foundries Index, which targets around 10 companies with substantial semiconductor foundry revenue.
TSMC held 72.5% of global foundry revenue in Q2 2026, yet the index caps individual constituents at 20% at each rebalance.
TSMC, Samsung, Intel and UMC represented about 77% of the index around AIFR’s launch, creating substantial company concentration.
AIFR charges 0.71%, compared with 0.35% for SMH and 0.33% for SOXX, while some costs associated with its swap exposure sit outside the stated expense ratio.
The Defiance Global Foundries ETF, ticker AIFR, began trading on Nasdaq on 9 September 2026. Defiance describes it as the first U.S.-listed ETF dedicated to semiconductor foundries, based on its review of SEC filings, ETF issuers and exchange listings as of 3 September 2026. The fund seeks to track the MarketVector Global Foundries Index and carries a 0.71% gross expense ratio.
Companies can qualify for the index by earning at least 50% of revenue from semiconductor foundry-related activities or generating at least $2 billion annually from those activities. The second route allows large diversified manufacturers to qualify even when foundry operations account for less than half of total company revenue.
Eligible activities extend beyond basic wafer fabrication. The methodology also covers advanced, mature and ngspeciality-node manufacturing analogue, power and RF nproduction image sensors photonics and other services tied directly to semiconductor foundries.
The index targets 10 companies. Around the fund’s launch, four names dominated the exposure.
| Underlying exposure | Approx. index weight | Main manufacturing exposure |
| TSMC | 21.6% | Advanced and mature nodes |
| Samsung Electronics | 20.5% | Foundry plus memory and electronics |
| Intel | 19.6% | Intel Foundry plus chip products |
| UMC | 15.3% | Mature and specialty nodes |
| Other foundries | 23.0% | GlobalFoundries, Tower, Hua Hong and others |
Source: MarketVector Global Foundries Index. Weights shown are launch-period figures and can move with market prices between quarterly rebalances.
Those first four companies represented about 77% of the index. AIFR therefore concentrates much of its exposure in a small group of large manufacturers even though its holdings span several foundry markets.
TSMC accounted for 72.5% of global foundry revenue in Q2 2026, according to TrendForce. Samsung followed at 5.9%, while the top 10 foundries collectively generated almost $53.49 billion.
AIFR’s index does not weight companies according to foundry revenue share. It uses modified float-adjusted market capitalisation and caps each constituent at 20% during a rebalance. It redistributes any excess weight among the remaining companies.
That rule sharply reduces TSMC’s dominance inside the portfolio while giving Samsung, Intel, UMC and smaller foundries much larger weights than their shares of global foundry revenue.
AIFR is therefore better read as a diversified basket of eligible foundry businesses than as a miniature replica of the industry’s revenue distribution.
Samsung and Intel show why the $2 billion revenue threshold matters. Samsung operates a major foundry business while also earning revenue from memory chips, mobile devices and other electronics. Intel combines Intel Foundry with processors and other product businesses.
Their share prices consequently reflect far more than third-party wafer manufacturing. A roughly 20% Intel exposure inside AIFR does not translate into 20% exposure to an independent contract foundry because the stock still represents Intel as a whole.
The same qualification applies to Samsung. AIFR targets companies with economically significant foundry operations rather than restricting itself to companies earning almost all revenue from contract manufacturing.
The biggest difference is which part of the semiconductor industry each fund captures.
| Feature | AIFR | SMH / SOXX |
| Main exposure | Foundry businesses | Broader semiconductor and equipment universe |
| Holdings | Around 10 | About 25–30 |
| Typical exposure | TSMC, Samsung, Intel, UMC | Nvidia, AMD, Broadcom, Micron, equipment firms |
| Expense ratio | 0.71% | SMH 0.35% / SOXX 0.33% |
SMH held 26 positions in September 2026, with Nvidia accounting for more than one-fifth of assets alongside TSMC, Broadcom, Micron, AMD, ASML, Intel and semiconductor-equipment companies. SOXX similarly tracks a broader semiconductor universe and charges 0.33%.
Nvidia contributes nothing directly to AIFR’s portfolio return because it does not hold Nvidia shares. Demand for Nvidia’s accelerators can still affect AIFR indirectly through manufacturers such as TSMC, which produces the chips.
That distinction separates ownership of a chip designer from exposure to the manufacturing capacity required to produce its designs.
Artificial intelligence is a major driver of demand for advanced semiconductor manufacturing, but AIFR reaches well beyond leading-edge AI chips.
TrendForce reported that TSMC’s 3nm and 5/4nm capacity remained fully booked in Q2 2026 amid strong AI and high-performance computing demand. The wider foundry market also benefited from power-management chips, networking products, PCs, consumer electronics and other applications using mature processes.
AIFR therefore combines several manufacturing cycles inside one portfolio.
TSMC has heavy exposure to advanced processes used for high-performance processors. UMC focuses much more heavily on mature and speciality nodes. Tower Semiconductor has significant speciality-process exposure, while GlobalFoundries serves automotive, communications and industrial applications alongside other markets.
Demand and pricing conditions across those businesses can diverge considerably even when all are classified as foundries.
A shift from a conventional semiconductor ETF to AIFR changes the geographical mix as well as the business model.
Around the fund’s launch, the MarketVector index allocated approximately 43.2% to Taiwan, 20.5% to South Korea and 19.6% to the United States. Taiwan and South Korea therefore accounted for almost two-thirds of the index.
SMH looked very different. Its August 2026 country allocation was approximately 82.3% in the United States, with 9.5% in Taiwan and 6.2% in the Netherlands.
AIFR consequently carries greater sensitivity to Asian semiconductor manufacturing, regional currencies, trade restrictions, export controls and supply-chain disruptions.
AIFR does not rely exclusively on directly owned shares.
Its launch-period holdings disclosure showed several large positions recorded as swap contracts alongside direct equity positions in companies including Intel, GlobalFoundries, Tower Semiconductor and Hua Hong. The prospectus allows AIFR to obtain synthetic exposure through total-return swaps and other derivatives when tracking its index.
A swap can replicate the economic return of an underlying security without the fund owning the shares directly. The structure also introduces counterparty risk because the fund depends on the other party to meet its obligations.
Costs deserve attention as well. AIFR’s prospectus states that costs embedded in its swaps are indirect expenses and are not included in the fund’s stated 0.71% annual operating expense figure.
Company concentration. Roughly 77% of the launch-period index weight sat in TSMC, Samsung, Intel and UMC, leaving individual company performance capable of having a sizeable portfolio effect.
Foundry-cycle exposure. Wafer pricing, fab utilisation, manufacturing yields and capacity expansion can affect several holdings at once.
Geographic concentration. Taiwan and South Korea represented nearly two-thirds of the launch-period index.
Derivative risk. Swap positions introduce counterparty, financing and tracking risks beyond ordinary direct equity ownership.
Higher costs. The 0.71% stated expense ratio exceeds those of SMH and SOXX, but excludes embedded swap costs.
Limited fund history. AIFR began trading only in September 2026, so it has no multi-year fund-level record of drawdowns, tracking behaviour, or market liquidity.
A narrower portfolio can produce returns that differ substantially from broad semiconductor benchmarks even when the overall chip sector is moving strongly.
AIFR concentrates much more directly on semiconductor manufacturing than SMH or SOXX. It removes large standalone positions in fabless designers such as Nvidia and Broadcom and greatly reduces exposure to semiconductor-equipment companies.
The result is a portfolio whose earnings drivers lean more heavily towards foundry utilisation, manufacturing technology, wafer pricing and capacity investment.
That narrower exposure comes with fewer holdings, stronger geographic concentration, greater reliance on individual foundry businesses and a higher stated expense ratio.
No. Nvidia is a fabless semiconductor company that designs chips and outsources production to manufacturers such as TSMC. Broader semiconductor ETFs, including SMH and SOXX, hold Nvidia directly.
Not entirely at the company level. Its index focuses on foundry-related revenue, yet diversified companies such as Samsung and Intel can qualify through the $2 billion annual foundry-revenue threshold even when other businesses contribute heavily to their overall results.
Yes. TSMC is one of the index’s largest exposures, although its weight is constrained by the 20% cap applied at each rebalance. Market movements can push its weight above or below that level between rebalances.
AIFR creates a narrower semiconductor exposure centred on companies earning meaningful revenue from fabrication. Its index rules matter as much as the theme because TSMC’s dominant industry share is capped, Samsung and Intel include sizeable non-foundry businesses, and part of the portfolio can be implemented through derivatives. The fund is best understood as a constructed basket of global foundry businesses rather than a market-share-weighted representation of the foundry industry.
