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As the broader markets turn in a stellar performance, technology has been far and away one of the hottest sectors. That's driven a huge 17.5 percent gain in Technology Select Sector SPDR (NYSE: XLK), just in the first quarter of 2012 alone.

Although highly commoditized, the semiconductor industry has been the top-performing industry group in the Technology Select Sector's portfolio, with Advanced Micro Devices (NYSE: AMD), LSI Corp (NYSE: LSI) and Micron Technology (NYSE: MU) all gaining on average about 40 percent so far this year.

With a 10.2 percent weighting in the portfolio, semiconductors have significantly buoyed the fund's performance so far this year. An improving economy lifts tech shares as a whole, as companies make long-deferred technology investments to remain competitive and consumers have greater wherewithal to buy a host of gadgets. However, two specific developments are the most responsible for the gains in semiconductors.

Floods devastated key global semiconductor manufacturing facilities in emerging market Thailand late last year, resulting in constricted supplies. At the same time, the increasing popularity of ultra-sophisticated consumer electronics has created a growing demand for advanced semiconductors.

PC shipments are expected to grow by 4.5 percent this year, driven by the expected launch of Windows 8, while tablet computer production-think Apple's (NSDQ: AAPL) iPad is expected to explode this year by more than 75 percent. Smartphone production also is expected to grow by about 7 percent in 2012. If those gains ultimately materialize, they will result in global semiconductor demand worth about $300 billion in 2012.

The stratospheric rise of Apple's share price of more than 40 percent so far this year has been another major positive for Technology Select SPDR, because the company is the fund's largest single holding, at 18.3 percent of assets.

While the iPhone remains a key driver of Apple's profit, the runaway success of the company's iPad tablet is largely to thank for the bullish sentiment the company currently enjoys. So far, the iPad controls the lion's share of the tablet market, with most other tablet makers already considered also-rans.

Barring a severe global economic disruption, semiconductor manufacturers should continue to benefit from booming chip demand this year. They'll continue to make positive contributions to Technology Select Sector SPDR, in tandem with well-positioned gadget manufacturers such as Apple.

Source: An ETF For Latest Boom In Tech Stocks: Technology Select Sector SPDR