Hua Hong Group in China has developed advanced chip manufacturing technology that could be used to produce artificial intelligence processors, marking a significant step in Beijing’s push to strengthen domestic semiconductor capabilities, according to four people familiar with the matter.
The group’s contract chipmaking arm, Huali Microelectronics, is preparing a 7-nanometre (nm) production process at its Shanghai facility, the sources said. If implemented successfully, it would make Hua Hong the second Chinese chipmaker capable of producing chips at this level of sophistication. Currently, Semiconductor Manufacturing International Corporation (SMIC), China’s largest contract chipmaker, is the only domestic firm producing chips using 7-nm technology.
The development comes after the United States relaxed some technology export restrictions last year, allowing Nvidia to sell its second-most powerful AI chips to China. Despite the partial easing, Beijing has continued to encourage local companies to rely more on domestically developed alternatives in a bid to reduce dependence on foreign suppliers.
It remains unclear how Hua Hong achieved the advanced manufacturing capability, including details on production efficiency or which major equipment suppliers contributed to the project. The progress on the 7-nm process had not been previously reported. However, sources said Chinese technology giant Huawei Technologies has been collaborating with the chipmaker on the development.
Hua Hong Group, Huali, its sister firm Hua Hong Semiconductor, and Huawei did not respond to requests for comment. Shares of Hua Hong Semiconductor jumped about 12% on Monday following the report.
SMIC currently uses immersion lithography machines supplied by Dutch semiconductor equipment maker ASML to manufacture 7-nm chips, although analysts have noted that production yields—the number of usable chips produced from each wafer—have remained relatively low. ASML declined to comment on questions regarding equipment deliveries.
Early testing underway
Research and development on Huali’s 7-nm technology began last year at its Hua Hong Fab 6 facility. The project received support from domestic equipment suppliers, including Huawei-backed SiCarrier, which tested some of its tools at a Shenzhen facility last year, according to another source.
The work follows an announcement by Hua Hong Semiconductor in December that it planned to acquire a controlling stake in Huali and raise 7.56 billion yuan (about $1.10 billion) to fund technological upgrades and further research at the foundry.
According to sources, Huali aims to launch an initial production capacity of several thousand wafers per month by the end of this year, with plans to expand output later.
Chinese GPU designer Biren Technology is reportedly using Huali’s 7-nm production line for tape-out, the stage when a chip design is converted into a physical prototype for testing before full-scale manufacturing begins.
Biren was placed on a U.S. trade blacklist in 2023 and soon lost access to contract manufacturing services from Taiwan Semiconductor Manufacturing Company (TSMC). The company did not respond to requests for comment.
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