China's No. 2 chipmaker readies 7 nm production as Beijing ramps up self-suffiency drive

China's Hua Hong Group has developed advanced chip manufacturing technologies that can be used to produce artificial intelligence chips, four people familiar with the matter said, a major milestone in Beijing's efforts to boost tech self-sufficiency.

The group's contract chipmaking business, Huali ​Microelectronics, is readying a 7-nanometre (nm) chipmaking process at its plant in Shanghai, the people said, which would make it the second Chinese chipmaker with such advanced technologies. Hua Hong is China's second-largest chipmaker.

China's largest contract chipmaker, SMIC, is at present the only domestic producer capable of making chips ‌with 7 nm ⁠technologies.


The development ⁠comes after Washington eased some of its tech export controls since last year, allowing Nvidia to sell its second-most-powerful AI chips to China.

Despite the easing, ​Beijing has encouraged domestic firms to purchase homegrown alternatives, as it seeks to wean itself off foreign suppliers.

Reuters could not determine how Hua ​Hong achieved the advanced manufacturing capability, its manufacturing efficiency and which major equipment suppliers were involved in the development. Hua Hong's development of a 7 nm chipmaking process has not been previously reported.

But Chinese tech giant Huawei Technologies has been in ​collaboration with the chipmaker for the 7 nm technologies, three of the sources ⁠said. All ‌of the sources declined to be named, because the information is not meant to be public.

Hua ​Hong Group, Huali, its ​sister company Hua Hong Semiconductor and Huawei did not respond to requests for comment.

SMIC uses ⁠Dutch chip equipment maker ASML's immersion machines to make 7 nm chips, but ​production yields - the number of good chips made per silicon wafer - have remained weak, ​analysts have said.

ASML said it does not comment on questions related to deliveries.

Test production under way

Huali's research and development on 7 nm chips at its Hua Hong Fab 6 began last year, with support from domestic equipment suppliers including Huawei-backed SiCarrier, which tested its equipment at a facility in Shenzhen last year, a separate source said. SiCarrier did not respond to a request for comment.

The development followed an announcement by Hua Hong Semiconductor in December that it planned to acquire a controlling ‌stake in Huali and raise a further 7.56 billion yuan ($1.10 billion) to fund technological upgrades and research at the foundry.

Huali is planning initial 7 nm chip production capacity of a few thousand wafers per month by the end of the year, with ⁠a goal to ramp up more later, two of the sources said.

Chinese graphics processing unit designer Biren is using Huali's 7 nm line for tape-out, a process in which a chip design is committed to a physical prototype for testing before ​mass production begins, one of the sources said.

Placed on a U.S. trade blacklist in 2023, Biren lost access to TSMC's contract manufacturing service shortly after. Biren did not respond to requests for comment.

The Hua Hong Fab 6 is the most advanced of seven foundries within the Hua Hong Group and currently manufactures logic chips using 22 nm and 28 nm process nodes, according to the company's website.

By contrast, its Fab 5 produces chips using mature technologies ranging from 40 nm to 55 nm.