It has become clear to the global semiconductor sector that Beijing does not intend to wait for sanctions relief from Washington. While analysts’ attention has so far focused almost exclusively on SMIC, it has quietly sprouted a serious domestic competitor. The Hua Hong Group, China‘s second-largest chipmaker, has made significant advances in 7 nanometre (nm) technology, a critical twist in the race for the Middle Kingdom’s technological self-sufficiency.
According to sources close to the matter, the group’s subsidiary Huali Microelectronics is preparing a production line at its Shanghai Fab 6 facility, which is where work is underway to deploy the 7nm process that has so far been the domain of SMICs alone in the local market. Although officially Fab 6 operates at 22nm and 28nm nodes, behind-the-scenes partnerships with domestic equipment suppliers, such as Huawei-backed SiCarrier, suggest that China is building its own manufacturing ecosystem, isolated from Western supply chains.
From a business perspective, a key player in this puzzle is Huawei. The giant is not only working with Hua Hong to develop lithographic processes, but is actively supporting local hardware manufacturers. This strategy is starting to bring tangible benefits to smaller chip designers. One example is Biren, a Chinese graphics processing unit (GPU) developer, which, after being cut off from TSMC ‘s production capacity in 2023, is now expected to use Huali’s lines to test prototypes of its AI chips.
The investment is not just a show of strength, but a real capital move. Hua Hong Semiconductor has announced plans to take control of Huali and raise more than $1 billion for technological upgrades. The goal is clear: to achieve a capacity of several thousand silicon wafers per month by the end of the year.
Although the manufacturing performance of Chinese companies’ advanced processes is still challenged compared to leaders such as ASML and TSMC, Beijing’s determination to build an alternative AI infrastructure is progressing faster than expected. Hua Hong is ceasing to be a ‘backdrop’ for SMIC, becoming a full-fledged pillar of Chinese digital independence.
