SOXX uses modified market cap weighting that caps the top 5 holdings at roughly 8% and others at 4% during quarterly rebalances. This keeps NVIDIA at only 5.88% despite its massive market size unlike SMH where it often exceeds 20%. The rule ensures diversification but limits upside from single mega-cap winners.

In June 2021 SOXX switched from the PHLX Semiconductor Sector Index to the ICE Semiconductor Index to reduce licensing costs. Performance history before that date reflects the old methodology making long-term comparisons tricky. The ticker remained the same but the underlying rules changed affecting how holdings like TSMC are weighted.

SOXX allocates 24.16% to semiconductor equipment companies such as Applied Materials unlike peers more focused on chip designers. This tilt provides resilience if chip prices fall but capital spending on factories continues. Combined with 75.71% in pure semiconductors the fund offers a balanced view of the supply chain.

SOXX holds Taiwan Semiconductor as an ADR but at a lower weight around 4% compared to 10-12% in SMH. The modified cap rules and index methodology limit foundry exposure. For investors seeking maximum manufacturing exposure other semiconductor ETFs may provide higher allocation to TSMC.