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The semiconductor industry was hit hard during the market crash, but those days may soon become a distant memory. In a bull market, the semiconductor sector and related exchange traded funds may be market leaders.

Even though the semiconductor industry is fraught with volatility, this sector could be destined to dish out profits in the year ahead, states Louis Basenese for Investment U. [4 Reasons Tech Could Go Boom.]

According to the world’s largest chipmaker, Inte Corp (INTC), the industry has just toughed out “the worst recession the semiconductor industry has seen since its inception.” Brighter days may be ahead, if the early signs are any indication. [ETF Strategies for a Revived Semiconductor Sector.]

In 2009, semiconductor sales plummeted 9.6%, but this year, sales are estimated to surge 19.9% this year, says Gartner, a leading technology research firm. What’s behind the numbers?

  • Companies that reduced spending during the downturn will have to start thinking of increasing spending and invest in future growth. Tech companies tend to be the first recipient of this money since their products or services increase efficiency and growth.
  • Corporate America is running on computers that are four or five years old, which may cost more to keep than to replace.
  • IT spending is often a priority at big corporations; if that equipment gets out of date, it could result in lost ground.

Texas Instruments (TXN) and LSI Corp. (LSI) both recently raised their guidance. The Semiconductor Industry Association announced that February sales increased 56% year-over-year. Intel is also set to report its quarter earnings next Tuesday, and it is widely expected that they will be better than expected.

For more information on the semiconductor sector, visit our semiconductor category.

  • Semiconductor HOLDRs (SMH)
  • SPDR S&P Semiconductor (XSD)
  • iShares Goldman Sachs Semiconductor Index (IGW)
  • PowerShares Dynamic Semiconductors Portfolio (PSI)
  • Ultra Semiconductors ProShares (USD)
  • UltraShort Semiconductors ProShares (SSG)

Max Chen contributed to this article.

Source: Semiconductor ETFs: Destined for Greatness?