Semiconductor Index (SOX) Analysis Updated

ARA Research

ARA (April’16)- © 2016 -

ARA Research

Philadelphia Semiconductor Sector (SOX) Index AnalysisA.R. AlvarezApril 2016

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ARA ResearchSOX Index Analysis – What’s New Data Updated to March 31, 2016 SOX Index vs. U.S. Recessions 13 -17 Correlation to NASDAQ / S&P500 20 - 21 Adding Recession Filter to SOX 38 - 41

Momentum Investing

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ARA ResearchSOX Index Analysis Outline SOX Index History 4 - 12 SOX Index vs. U.S. Recessions 13 - 17 SOX Index vs. U.S. Benchmarks 18 - 26 SOX Index Momentum Analysis 27 - 41 Appendix: SOX Background 42 - 50

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ARA Research

SOX Index History

ARA ResearchARA Research

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ARA Research SOX Index Companies SOX Established Dec 1993; Options Trading

Started Sept 1994; Split 2:1 July 1995 Top 30 Semi Companies By Market Cap Of 16 Companies on Index Sept 1994:

Eight Still on Index (ADI, AMAT, CY, IDTI, INTC, MU, TER, TXN)

Five Were Bought (IRF, LSI, MOT, NVLS, NSM); Acquiring Company on Index

Three Dropped Off (AMD, LSCC, VLSI) Index Weight Limited to ~8%; Limits Impact

of Larger Market Cap Companies (Broadcom / Avago a Temporary Exception)

Market vs. Index Modified Market Cap Aggregate MC ~$750B vs. Index MMC~$450B Max Company MC: Intel $151B vs. ~$35B Index MMC;

Similar to TI Which Has MC of ~$59B) Median Index MMC ~$15B, Market Cap ~$11B (Maxim) Min Semi Company Market Cap Si Labs ~$1.9B

Note: Green Highlights companies added since Oct’15 (replace Atmel, KLA-Tencor, and Sandisk)

Ticker Name Weight (%)

Index MMC ($B)

Market Cap ($B)

ADI Analog Devices, Inc. 4.0 $18 $18 AMAT Applied Materials, Inc. 4.0 $18 $24 ARMH ARM Holdings plc 1.4 $6.2 $19 ASML ASML Holding NV 1.8 $8.2 $41 AVGO Broadcom (Avago) 11.6 $52 $59 CAVM Cavium, Inc. 1.0 $4.7 $3.2

CY Cypress Semiconductor 0.9 $4.2 $2.6 IDTI Integrated Device Tech 0.9 $4.0 $2.7 INFN Infinera Corporation 0.7 $3.1 $2.1 INTC Intel Corporation 7.8 $35 $151 LLTC Linear Technology Corp 3.6 $16 $11 LRCX Lam Research Corp 4.1 $18 $13 MCHP Microchip Technology Inc. 3.3 $15 $11 MPWR Monolithic Power Systems 0.8 $3.8 $2.5 MRVL Marvell Technology Group 1.7 $7.5 $5.1 MSCC Microsemi Corporation 1.4 $6.2 $4.1

MU Micron Technology, Inc. 3.6 $16 $11 MXIM Maxim Integrated Products 3.4 $15 $11 NVDA NVIDIA Corporation 4.2 $19 $20 NXPI NXP Semiconductors NV 4.3 $19 $29 ON ON Semiconductor 1.3 $6.0 $4.1

QCOM Qualcomm Incorporated 7.4 $33 $77 QRVO Qorvo, Inc. 2.1 $9.3 $5.9 SLAB Silicon Labs 0.5 $2.4 $1.9 SUNE SunEdison, Inc. 0.0 $0.2 $0.2 SWKS Skyworks Solutions Inc. 3.9 $18 $14 TER Teradyne Inc. 1.4 $6.2 $4.2 TSM Taiwan Semiconductor Mfg 7.2 $32 $130 TXN Texas Instruments Inc. 8.0 $36 $59 XLNX Xilinx Inc. 3.5 $16 $12

Market Close April'20 2016 1.0 $450 $747

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ARA Research

SOX Index Employs Algorithm to Limit Contribution of Largest Market Cap Companies; Balances Bi-Modal Nature of Market Cap

SOX Company Market Caps

Market Cap of Companies in SOX ($B)

Data as of April 20, 2016

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ARA Research SOX Index Cycles

SOX Index Has Exhibited 8 Cycles (Defined as ±30%) Since Inception

Through March 31, 2016

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ARA Research SOX Index Cycle Min-Max

The Median “Up” Cycle was 123% vs. a Median “Down” Cycle of -57%, But The Distribution Was Bi-Modal, Consistent with the SOX’s Relatively High Volatility

Median Min MaxUp 123% 50% 496%

Down -57% -69% -22%Neutral 3% -4% 9%

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ARA Research SOX Index Cycle Lengths

The Median “Up” Cycle Length was 19 Mths vs. a Median “Down” Cycle Length of 10 Mths

Median Min MaxUp 19 6 30

Down 10 7 17Neutral 14 11 17

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ARA ResearchSOX Index vs. Semi Revenue

SOX Has Historically Served as Leading Indicator for Semi Revenue


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ARA Research SOX / Semi Sales RatioAvg Std Dev

1995 - 1999 26 92000 - 2004 39 162001 - 2009 20 42010 - 2014 18 31995 - 2016 25 12

SOX / Semi Sales Ratio ~20 Over Past 10+ Years


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ARA Research SOX Index Summary Eight “Up-Down” and 2 “Sideways” Cycles; Currently in Early Phase of a

“Down” or “Sideways” Cycle; Down ~10% From Previous Peak Peaked During “Internet” Bubble of 1999 & 2000; Still Trades at ~50% of

2000 Peak, Even Though Has Had a Steady Rise From 2008 Financial Crises Fairly Extreme Movements Either Up (>100%) or Down (> -75%) Over

Relatively Short Periods Median Up-Cycle Gain (123%) Was ~2X The Median Down-Cycle Median Up-Cycle Length (~20 Mths) Was ~2X Median Down- Cycle, So

Relative Slope (~6.5% Per Month) Was Same For Both Portions Setting Aside Two Neutral Cycles, Only One Cycle Was Less Than ±30%;

The Down-Cycle From June to Dec 2011 Which Only Dropped ~22% SOX Index Tends to Lead Semi Revenue By a Few Months on Down-Cycles,

But is Coincident With Semi Revenue Increases on Up-Cycles The Most Recent Cycle is an Exception Where Semi Revenue Declined Well

Before the SOX Index Started to Drop (Due to Heavy 2015 M&A ?)

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ARA Research

SOX Index:U.S. Recessions


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ARA ResearchSOX Index vs. U.S. RecessionNBER* Recessions

in Grey

SOX Index Has Exhibited Significant Drops Outside of Recession Periods


* National Bureau of Economic Research

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ARA Research SOX Index Off-Peak ChartNBER Recessions

in Grey

SOX “Off-Peak” Chart Since Index Inception Highlights 2000 Falloff


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ARA Research

NBER Recessions in Grey

SOX Index Off-Peak Since 2001

SOX “Off-Peak” Chart Since 2001 Eliminates the Impact of the 2000 Run-Up & More Clearly Shows Current Index Dynamics


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ARA ResearchSOX vs. Recession Summary SOX Has Experienced Significant Drops Outside of Recession Boundaries

8 Cycles with >30% Drop Identified Since Index Inception Index Period Encompassed 2 Recessions

2001 Recession: The SOX Exhibited Behavior Specific to Dynamics of Its Market Segment (Technology) ~ 1 Year Before Recession Start the SOX Had Major Drop; Also

Exhibited By Tech Heavy NASDAQ Precipitated by Telecom & Dot Com ‘Bubble’ As Percentage of Peak, SOX Lost More Value Prior to Recession Than

After Start of Recession; Not Typical of Other Indices/Recessions 2008 Recession: The SOX Behaved in a Manner Similar to Other Major US

Indices; i.e. If Total Drop From Previous Recent Peak = 100%: ~33% Drop Before Recession Start ~67% Drop After Recession Start Recovery Starts Well Before Recession End

Given SOX’s High Correlation to Major US Indices (Pg. 20 & 21), It is Likely to Exhibit Behavior More Like 2008 than 2001 in Next Recession

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ARA Research

SOX Index Benchmarks


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ARA Research


SOX Index Behavior “Mimics” S&P 500 and NASDAQ – How Well?

SOX Index vs. S&P500 & NASDAQ

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ARA ResearchSOX Correlation to NASDAQ

1994 - 2016 2001 - 2016 2006 - 20160.59 0.48 0.79

Regression Coefficient (R2)

During Past 10 Years SOX & NASDAQ Have Become Highly Correlated

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ARA ResearchSOX Correlation to S&P500


1994 - 2016 2001 - 2016 2006 - 20160.5 0.58 0.89

During Past 10 Years SOX & S&P500 Have Become Highly Correlated

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ARA Research

$1,000 Becomes*:Benchmark Performance: B&H

End Mar'16S&P $4,560

Russell $4,378DJI $4,783

NASDAQ $6,578SOX $5,690

* Since SOX Inception


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ARA ResearchSOX Index Relative Performance

vs. NASDAQ: SOX Performance Generally Worse in any Given 5 Year Period; Worse Overall

vs. S&P500: SOX Performance Better in “Good” 5 Year Periods & Worse in “Bad” 5 Year; Slightly Better Overall

Similar Performance For All 5 Indices in Last 5 Year Period

CAGR

CAGR S&P500 Dow R2000 NASDAQ SOX1995 - 1999 25% 26% 14% 38% 36%2000 - 2004 -3.5% 1% 5% -12% -11%2005 - 2009 -1.2% 2.4% -0.2% 1.4% -3.0%2010 - 2014 13% 14% 13% 16% 14%1995 - 2016 7.2% 7.3% 7.2% 9.3% 7.5%

Note: Through End March’16

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vs. NASDAQ: SOX Annualized Volatility ~50% Higher, Decreasing Modestly (From 1.9X to 1.4X) Over Timevs. S&P500: SOX Annualized Volatility ~2x Higher,

Decreasing Significantly (From 2.5X to 1.6X) Over Time

Annualized Volatility

Volatility S&P500 Dow R2000 NASDAQ SOX1995 - 1999 16% 16% 14% 21% 40%2000 - 2004 20% 20% 23% 35% 57%2005 - 2009 24% 22% 30% 25% 32%2010 - 2014 16% 15% 22% 18% 25%1995 - 2016 19% 18% 22% 25% 39%

Note: Through End March’16

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NASDAQ, S&P 500 and Dow Indices Historical Risk Adjusted Return (CAGR/Volatility) All ~2X Better Than SOX

For the Most Recent 5 Years (Since March 2016) The Difference in Risk Adjusted Return Has Narrowed Such That the NASDAQ,

S&P 500 and Dow Indices Are ‘Only’ 1.5 Better Than SOX

CAGR /Annualized Volatility

CAGR/Volatility S&P500 Dow R2000 NASDAQ SOX1995 - 1999 1.6 1.7 1.0 1.8 0.92000 - 2004 -0.2 0.0 0.2 -0.3 -0.22005 - 2009 -0.1 0.1 0.0 0.1 -0.12010 - 2014 0.8 1.0 0.6 0.9 0.61995 - 2016 0.4 0.4 0.3 0.4 0.2

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ARA ResearchIndices Comparison Summary Over The Past 10 Years The SOX Has Exhibited Relatively High Correlation

to the NASDAQ (R2 ~0.8) and S&P500 (R2 ~0.9); Prior to That Not So Much For The Period 1995 – March 2016, The NASDAQ, SOX, and S&P500 CAGR

was 9.3%, 7.5%, & 7.2% With a Volatility of 25%, 39%, & 19% Respectively SOX Relative Risk (CAGR/Volatility) Was Worse Than NASDAQ or S&P500 Individual 5 Year Periods For Most Part Exhibit Similar Relative Results $1,000 Invested in Each of the 5 Indices Since May 1994 Grow to ~$6,600,

~$5,700, ~$4,400 to ~$4,800 (Excluding Dividends) March 2016 For NASDAQ, SOX, DJI / Russell 2000/S&P500 Respectively

Whereas The Four Benchmark Indices are Currently Above or Close to Their All Time High, The SOX is at ~50% of It’s 2000 Peak

If One Were Unlucky Enough to Have Invested at or Near The SOX Peak in 2000, They Would Still Have Lost ~50% of The Investment as of March 2016

The SOX Has Exceeded Its Pre-2008 Financial Crises ‘Peak’, But It Took 6 Years to Recover

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ARA Research

SOX Index Momentum AnalysisARA ResearchARA Research

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ARA Research SOX Index Momentum Objective:

Determine if Simple Momentum Rules Can Be Utilized on the SOX Index to Obtain a Better Return Than a “Buy & Hold” Strategy

Two Distinct Momentum Rules Utilized First Momentum Rule (Momentum Always “On”):

Conventional Use of Momentum Buy on Positive Momentum: “Current” Price > Lookback Period Price Sell on Negative Momentum: “Current” Price < Lookback Period Price

Second Momentum Rule (Momentum “On” Only During Recession): Growth Trend Timing: http://www.philosophicaleconomics.com/2016/01/gtt/ Use Conference Board Co-Incident Composite Indicator (or Your Favorite

Recession Indicator(s) ) to Determine Whether In or Out of Recession Outside Recession: Buy on Positive Momentum or Stay Invested (B&H) Inside Recession: Apply First Momentum Rule

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ARA Research Momentum Calculations Daily and End of Month Market Close Calculations Utilized Lookback Periods:

Absolute Performance: 3, 6, and 12 Month Absolute Performance With Non-Zero (2.5%) Cutoff: 6 Months Moving Average: 200 Day Simple Moving Average and Various Exponentially Weighted Moving Averages

Buy-Sell Decisions Made Once Per Mth; Last Trading Day of the Mth Tax Scenarios (Deferred vs. Instant):

1) Taxed at End of Holding Period (Retirement Account)s; Also True for B&H2) Taxed at 33% on a Trade Gain, No Tax Benefit on Trade Loss

Fees/Spread: Low Cost ($10) Trades, Spread Not Taken Into Account Invested Return and Maximum Draw-Down Calculated

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ARA ResearchMomentum Summary: 1st Rule

A Momentum-Based Trading Rule Can Yield Better Results Than B&H Lookback Period Matters – A Lot: Only 200 Day SMA and 3 Mth Lookbacks

Provided Greater Returns Than B&H in a Taxed Account Taxes Matter: In a Deferred Tax Account Momentum-Based Trading Yields

Better Results Than B&H in All Cases Except for 12 Mth Lookback No Momentum Rule Will Outperform B&H All of The Time; There Can be

Significant Periods (Years) of Underperformance 3 Month Lookback Period Gave Best Overall Performance Over 20 Yr

Period, But in a Taxed Account Underperformed B&H for First 14 Years 200 Day Simple Moving Avg Outperformed B&H Through 2013, But Has

Underperformed Since & is Now ~ Break-even in a Taxed Account

B&H Taxed No Tax Taxed No Tax Taxed No Tax Taxed No Tax Taxed No Tax$1,000 Becomes $4,142 $5,103 $10,147 $2,650 $4,289 $1,860 $2,279 $4,276 $6,877 $3,685 $5,611$ Trades (B&S) n/a 58 58 44 44 26 26 38 38 42 42Avg Trades/Year n/a 2.9 2.9 2.2 2.2 1.3 1.3 1.9 1.9 2.1 2Max Draw Down 73% 60% 50% 57% 44% 65% 60% 50% 42% 57% 44%Median Draw Down 52% 37% 29% 42% 38% 39% 39% 35% 30% 41% 36%

3 Mth Lookback 6 Mth Lookback 12 Mth Lookback 200 Day SMA 6M LB / 2.5% CritSOX Results Through March 31, 2016

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ARA ResearchSOX B&H vs. Mtm 3 Mth LookbackB&H Taxed No Tax

$1,000 Becomes $4,142 $5,103 $10,147$ Trades (B&S) n/a 58 58Avg Trades/Year n/a 2.9 2.9Max Draw Down 73% 60% 50%Median Draw Down 52% 37% 29%

3 Mth Lookback


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6 Mth Lookback


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12 Mth Lookback


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ARA ResearchSOX Index & 200 Day SMA


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ARA ResearchB&H vs. 200 Day SMA Lookback


B&H Taxed No Tax$1,000 Becomes $4,142 $4,276 $6,877$ Trades (B&S) n/a 38 38Avg Trades/Year n/a 1.9 1.9Max Draw Down 73% 50% 42%Median Draw Down 52% 35% 30%

200 Day SMA

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ARA ResearchImpact of Non-Zero Threshold

Criteria: 6 Mth Look Price ≥ 2.5% Higher Than Current Price to “Buy” Through March 31, 2016


6 Mth LB / 2.5% Criteria

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ARA Research Where Are We So Far? Compared to “Buy & Hold” Investing No Really Good

Alternatives Using Simple Momentum Rules on SOX Results Are Highly Dependent on Lookback Period; Only

One of The Four Lookback Periods Beat B&H in a Taxed Account With Any Degree of Margin

The Best Performing Lookback Period (3 Mths), While Producing a Good End Result, Under-Performed “Buy & Hold” For The First 14 Years of The Index

Is There a Way To Adjust Momentum in a Simple Manner That Significantly Improves The Results?

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ARA ResearchMomentum Summary: 2nd Rule

Applying Recession Filter (Use Mtm Rule Only Within Recession Limits) Significantly Improves Performance Over Using Mtm Rule at All Times

Required Very Few (Only 6 Trades; 3 Buy-Sells) Trades Over 20+ Years Does Not Provide as Good Overall Return as Mtm 3 Mth Lookback, But Does

Outperform B&H in Any Given Month For Almost The Entire 20+ Year Period As Noted Previously The Mtm 3 Mth Lookback Method Underperformed B&H

For Most of the First ~14 Years of the SOX (Pg. 37) Much More Likely to Stay With an Investment Strategy When It Out-Performs

Alternative Strategies in Most Years

B&H Taxed No Tax Taxed No Tax Taxed No Tax$1,000 Becomes $4,142 $5,103 $10,147 $4,276 $6,877 $6,917 $8,590$ Trades (B&S) n/a 58 58 38 38 6 6Avg Trades/Year n/a 2.9 2.9 1.9 1.9 0.3 0.3Max Draw Down 73% 60% 50% 50% 42% 66% 66%Median Draw Down 52% 37% 29% 35% 30% 52% 42%

SMA - Recession3 Mth Lookback 200 Day SMASOX Results Through March 31, 2016

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ARA ResearchMomentum Rule Only in Recession

Criteria: 200 Day SMA Applied Only During Recessionary Periods


200 Day SMA - RecessionSOX Results Through March 31, 2016

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ARA ResearchMomentum: Always vs. Recession

Criteria: 200 Day SMA – Res = Momentum Rule Applied Only During Recessions200 Day SMA – Momentum Rule Applied Entire Time

B&H Always Recessions$1,000 Becomes $4,142 $4,276 $6,917$ Trades (B&S) n/a 38 6Avg Trades/Year n/a 1.9 0.3Max Draw Down 73% 50% 66%Median Draw Down 52% 35% 52%

200 Day SMASOX Results Through March 31, 2016

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ARA ResearchWW Semiconductor Sales

Growth Rate Drop From Historical 15% CAGR to 6% Since 2000Given Industry Size & Penetration Don’t Expect Return to 15% CAGR Unless

Global GDP Exceeds 4 – 4.5% Consistently

“Semiconductor Industry Primer 2015”D. Wong (Wells Fargo) Oct’15

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ARA ResearchNASDAQ Correlation to S&P500


1994 - 2016 2001 - 2016 2006 - 20160.90 0.94 0.93

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ARA Research SOX Index Summary PHLX Semiconductor Sector Index is a Modified Capitalization Weighted

Index Made Up of the Major Companies in the Semiconductor Sector Two Versions

Price Return Index (SOX): Calculated Without Regard To Cash Dividends on IndexSecurities (Initiated Dec 1st 1993 at Base Value = $100)

Total Return Index (XSOX): Reinvests Cash Dividends on Ex-Date.; Synchronized toValue of The Price Return Index at The Close on Dec 22, 2009

Both Indexes Reflect Extraordinary Cash Distributions Index Eligibility (Main Points)

Be Listed on NASDAQ Stock Market or New York Stock Exchange Have Minimum Market Capitalization of $100 Million Have Traded at Least 1.5 Million Shares in Each of Previous Six Months

Index Evaluation Index Securities Evaluated Every Sept; Additions/Deletions Effective 3rd Friday of Sept Securities Meeting Eligibility Criteria as of End of July Ranked By Market Capitalization Top 30 Securities By Market Capitalization Included in Index

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ARA Research SOX Index Calculation Value of Index Equals Aggregate Value of Index Share Weights

Step 1) Calculate Total Market Value of Index = Sum of Market Value of Each Index Component = TheLast Sale Price Multiplied By Number of Shares Outstanding

Step 2) Calculate Weight of Each Index Component = Its Market Value Divided By Total Market Valueof Index

Step 3) Employ Capitalization Weighting Adjustment/Modification Algorithm to Limit Contribution ofLargest Market Cap Companies to 8% or Less (See Rebalancing Section)

Step 4) Calculate Aggregate “Modified” Capitalization Weighted Market Value = Sum of Each IndexComponent's Weight and Last-sale Price

Step 5) Divide Aggregate Weighted Market Value By Divisor, Which Scales Aggregate Value to LowerValue More Suitable For Reporting

Index Balancing Index Employs a Modified Market Capitalization Weighting Methodology Each Qtr, Index Rebalanced Such That Max Weight of Any Security Does Not Exceed 8% and No

More Than 5 Securities Are at That Cap Excess Weight of Any Capped Security is Distributed Proportionally Across Remaining Index

Securities If After Redistribution, Any of The 5 Highest Ranked Index Securities are Below 8%, These

Securities are Not Capped Next, Any Remaining Index Securities in Excess of 4% are Capped at 4% and The Excess Weight

is Redistributed Proportionally Across Remaining Index Securities Process is Repeated, As Necessary, To Derive The Final Weights

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ARA ResearchSOX Index Companies 2013 - 15Ticker Name Weight

(%)Index MMC ($B)

Market Cap ($B)


Index MMC ($B)


Index MMC ($B)

ADI Analog Devices, Inc. 4.1 $18.4 $20.0 ADI Analog Devices, Inc. 3.9 $19.8 ADI Analog Devices, Inc. 3.8 $9AMAT Applied Materials, Inc. 3.7 $16.3 $19.7 ALTR Altera (Intel) 2.7 $13.5 ALTR Altera (Intel) 3.3 $7ARMH ARM Holdings plc 1.8 $8.0 $23.1 AMAT Applied Materials, Inc. 6.2 $31.4 AMAT Applied Materials, Inc. 6.3 $14ASML ASML Holding NV 1.8 $8.0 $40.3 ARMH ARM Holdings plc 1.4 $6.9 AMD Advanced Micro Devices 0.7 $2ATML Atmel Corporation 1.0 $4.5 $3.6 ASML ASML Holding NV 2.0 $10.3 ARMH ARM Holdings plc 1.8 $4AVGO Avago Technologies 7.2 $32.3 $35.7 ATML Atmel Corporation 0.8 $4.0 ASML ASML Holding NV 3.0 $7CAVM Cavium, Inc. 1.1 $5.0 $4.0 AVGO Avago Technologies 4.2 $21.6 ATML Atmel Corporation 1.0 $2

CY Cypress Semiconductor 0.9 $4.1 $3.4 BRCM Broadcom (Avago) 4.3 $21.8 AVGO Avago Technologies 3.4 $8INFN Infinera Corporation 0.7 $3.3 $2.4 CREE Cree 0.9 $4.8 BRCM Broadcom (Avago) 3.8 $9INTC Intel Corporation 8.7 $39.1 $166.0 FSL Freescale (NXP) 1.5 $7.7 CREE Cree 2.2 $5KLAC KLA-Tencor Corporation 2.9 $12.9 $10.2 INTC Intel Corporation 7.8 $40.0 FSL Freescale (NXP) 1.2 $3LLTC Linear Technology Corp 3.1 $13.9 $11.3 KLAC KLA-Tencor Corporation 3.3 $16.7 INTC Intel Corporation 8.0 $18LRCX Lam Research Corporation 3.2 $14.5 $11.8 LLTC Linear Technology Corp 2.6 $13.0 KLAC KLA-Tencor Corporation 3.3 $8MCHP Microchip Technology Inc. 2.9 $13.0 $10.4 LRCX Lam Research Corporation 3.1 $16.1 LLTC Linear Technology Corp 2.9 $7MRVL Marvell Technology Group 1.3 $6.0 $5.0 MCHP Microchip Technology Inc. 2.2 $11.0 LRCX Lam Research Corporation 2.7 $6MSCC Microsemi Corporation 1.0 $4.3 $3.5 MRVL Marvell Technology Group 1.7 $8.7 LSI LSI CORP 1.4 $3

MU Micron Technology, Inc. 3.7 $16.5 $18.6 MU Micron Technology, Inc. 8.1 $41.4 MCHP Microchip Technology Inc. 2.6 $6MXIM Maxim Integrated Products 3.1 $14.1 $10.8 MXIM Maxim Integrated Products 2.1 $10.6 MRVL Marvell Technology Group 1.8 $4NVDA NVIDIA Corporation 4.3 $19.4 $15.4 NVDA NVIDIA Corporation 2.6 $13.5 MU Micron Technology, Inc. 4.7 $11NXPI NXP Semiconductors NV 4.2 $18.8 $22.3 NXPI NXP Semiconductors NV 4.0 $20.6 MXIM Maxim Integrated Products 2.6 $6ON ON Semiconductor 1.3 $5.7 $4.7 ON ON Semiconductor 0.9 $4.7 NVDA NVIDIA Corporation 2.7 $6

QCOM Qualcomm Incorporated 7.7 $34.7 $95.4 QCOM Qualcomm Incorporated 8.3 $42.3 NXPI NXP Semiconductors NV 3.2 $7QRVO Qorvo, Inc. 2.1 $9.4 $7.7 RFMD RF Micro Devices (Quorvo) 0.9 $4.8 ON ON Semiconductor 1.0 $2SNDK SanDisk Corp. 4.5 $19.9 $16.0 SNDK SanDisk Corp. 3.9 $19.7 QCOM Qualcomm Incorporated 7.6 $17SUNE SunEdison, Inc. 0.7 $3.1 $2.5 SUNE SunEdison, Inc. 1.3 $6.7 SNDK SanDisk Corp. 4.6 $10SWKS Skyworks Solutions Inc. 3.4 $15.2 $15.8 SWKS Skyworks Solutions Inc. 2.8 $14.0 SWKS Skyworks Solutions Inc. 1.5 $3TER Teradyne Inc. 1.1 $5.0 $4.0 TER Teradyne Inc. 0.9 $4.8 TER Teradyne Inc. 1.0 $2TSM Taiwan Semiconductor Mfg 6.0 $26.7 $116.5 TSM Taiwan Semiconductor Mfg 4.2 $21.6 TSM Taiwan Semiconductor Mfg 5.9 $13TXN Texas Instruments Inc. 8.8 $39.4 $60.5 TXN Texas Instruments Inc. 8.3 $42.3 TXN Texas Instruments Inc. 8.0 $18XLNX Xilinx Inc. 3.5 $15.6 $48.7 XLNX Xilinx Inc. 3.0 $15.2 XLNX Xilinx Inc. 3.7 $8

Market Close Oct'22 2015 1.0 $447 $809 1.0 $509 1.0 $227

October 2015 October 2014 October 2013

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ARA ResearchSOX Index Sept vs. Oct 2010 SOX Index Transitioned to

Modified Market Cap Algorithm and 30 Companies Oct 2010

Prior to That SOX Index Carrier 16 – 21 Companies, While the iShares ETF (SOXX) Carried 52 Companies

Since Oct 2010 Both The SOX and SOXX Carried the Identical 30 Companies

Blue = Companies Added Oct’2010

Weightings Shown are for SOXX


Index MMC ($B)

Ticker NameALTR Altera (Intel) 4.18 $7.4 ALTR Altera (Intel)AMAT Applied Materials, Inc. 7.86 $13.9 AMAT Applied Materials, Inc.AMD Advanced Micro Devices 3.25 $5.8 AMD Advanced Micro DevicesATHR Atheros (Qcom) 1.45 $2.6 ATHR Atheros (Qcom)AVGO Avago Technologies 3.88 $6.9 BRCM Broadcom (Avago)BRCM Broadcom (Avago) 8.98 $15.9 CREE CreeCREE Cree 3.16 $5.6 HITT Hittite Microwave (ADI)CRUS Cirrus Logic 0.57 $1.0 INTC Intel CorpHITT Hittite Microwave (ADI) 1.04 $1.8 KLAC KLA-Tencor CorpINTC Intel Corp 7.48 $13.2 LLTC Linear Technology CorpKLAC KLA-Tencor Corp 3.94 $7.0 LRCX Lam Research CorpLLTC Linear Technology Corp 3.72 $6.6 MU Micron TechnologyLRCX Lam Research Corp 3.74 $6.6 NSM National Semi (TI)MKSI MKS Instruments 0.68 $1.2 NVLS Novellus Systems (Lam)MRVL Marvell Technology Group 6.85 $12.1 SNDK SanDisk Corp.

MU Micron Technology, Inc. 4.22 $7.5 STM ST MicroelectronicsNETL Netlogic Micro (BCOM) 1.26 $2.2 TER TeradyneNSM National Semi (TI) 2.16 $3.8 TSM Taiwan Semiconductor Mfg NVDA NVIDIA Corporation 4.26 $7.5 TXN Texas Instruments Inc.NVLS Novellus Systems (Lam) 1.77 $3.1 WFR MEMC ElectronicsPOWI Power Integrations 0.63 $1.1 XLNX Xilinx Inc.RBCN Rubicon Technology 0.35 $0.6 SNDK SanDisk Corp. 3.73 $6.6 STM ST Microelectronics 0.46 $0.8 TER Teradyne Inc. 1.34 $2.4 TSM Taiwan Semiconductor Mfg 3.83 $6.8 TXN Texas Instruments Inc. 8.48 $15.0

VECO Veeco Instruments 1.13 $2.0 WFR MEMC Electronics 1.92 $3.4 XLNX Xilinx Inc. 3.67 $6.5

100% $177

September 2010October 2010

Semiconductors

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ARA Research SOX Index Cycles Table

Median Min MaxUp 123% 50% 496%

Down -57% -69% -22%Neutral 3% -17% -4%

Median Min MaxUp 19 6 30

Down 10 7 17Neutral 14 11 17

Cycle Change Summary Cycle Length Summary

Cycle Start

Cycle End

Months in Cycle

Cycle Change

Cycle Start

Cycle End

Months in Cycle

Cycle Change

May-94 Sep-95 17 153% Feb-04 Aug-04 7 -65%Oct-95 Jul-96 10 -52% Sep-05 Apr-06 20 50%Aug-96 Sep-97 14 171% May-06 Sep-07 17 -4%Oct-97 Aug-98 11 -50% Oct-07 Feb-09 17 -63%Sep-98 Aug-00 24 496% Mar-09 May-11 27 133%Sep-00 Sep-01 13 -69% Jun-11 Dec-11 7 -22%Oct-01 Mar-02 6 72% Jan-12 Nov-12 11 9%Apr-02 Jan-03 10 -57% Dec-12 May-15 30 93%Feb-03 Jan-04 12 113% Jun-15 Mar-16 5 -9%

Semiconductors

ARA (April’16)- © 2016 - 50

ARA Research Index Volatility Basic Definition:

Standard Deviation of Historical Returns Basically a “Dispersion” Measure; Greater Dispersion (Volatility) Implies Greater Risk Upside & Downside Price Movements Are Equally Considered in the Volatility

Calculation; The Sortino Ratio Attempts to Capture Just Downside Volatility Calculation

Step 1) Calculate Daily Periodic Stock Return (Ri) = (Pi – Pi-1)/Pi ; Where Pi is Current Day’s Closing Price and Pi-1 is Closing Price on Previous Day

More Often Ri = Ln(Pi/Pi-1) is Used as it Better Represents a Continuously Compounded Return; Approximately The Same For Most Short Intervals

This was the Method Employed in This StudyStep 2) Decide on Time Period; Volatility for Both the Full 20 Year (1994 – 2014) as Well

as 5 Year Intervals Was Calculated for The 3 Indices Examined in This StudyStep 3) Calculate Daily Sample Variance = [ Sum(Pi-1 – Avg P)2 ] / (m-1); Where ‘m’ =

Number of Sample Data Points Over Which The Sum is PerformedStep 4) Calculate Annualized Sample Volatility = Sqrt (Sample Variance) x Sqrt (250);

250 Being The Number of Trading Days in a Typical Year Note: To Calculate Annualized Weekly or Monthly Volatility Multiply The

Corresponding Weekly or Monthly Volatility By Sqrt(52) or Sqrt(12) Respectively; The Calculated Volatility Will Be Slightly Different in Each Case

Semiconductor Index (SOX) Analysis Updated

Economy & Finance

Transcript of Semiconductor Index (SOX) Analysis Updated