China’s No 2 foundry Hua Hong invests US$2b in new fab to meet surging AI-driven demand
Major Chinese foundry Hua Hong Grace Semiconductor is pouring US$2 billion into a massive capacity expansion in the Chinese chip production hub of Wuxi, racing to meet skyrocketing domestic demand for AI infrastructure and bypass US tech curbs. The fresh capital would fund the construction of a new 12-inch speciality line, its third facility in the eastern Chinese city, the country’s…
Chinese foundry Hua Hong Grace Semiconductor is investing US$2 billion to expand its capacity in the Wuxi chip production hub, in response to a surge in domestic demand for AI infrastructure and to circumvent US tech restrictions. This capital will be used for constructing a new 12-inch specialty line, the company's third facility in the eastern Chinese city, according to a filing to the Hong Kong stock exchange.
The expansion will boost monthly production capacity by 55,000 wafers, roughly a 30 per cent increase to its total capacity in Wuxi. The project, executed through a joint venture with state-backed entities including the Hua Xin Fund, will cost US$4.2 billion in total. Hua Hong and its Shanghai subsidiary each contribute US$1 billion and US$1.1 billion respectively, owning a 51 per cent controlling stake, while the state entities fund the remaining capital.
Hua Hong's existing fabrication plants in Shanghai and Jiangsu are currently at full capacity, with the Shanghai plant exceeding 103 per cent utilization in the second quarter, per the company's earnings report from August. The new facility, named Fab 9B, began construction in March and will specialize in specialty technology chips for power management systems, microcontrollers, and data centers.
Hua Hong's chairman and president, Bai Peng, stated on a May earnings call that the company has not noticed any impact from US export controls on equipment procurement for this new venture. This expansion follows Hua Hong's existing operations in Wuxi, including Fab 7, a 12-inch plant producing 95,000 wafers monthly, and Fab 9A, a plant under construction with a planned capacity of 83,000 wafers per month.
Major Chinese chipmakers, including Hua Hong and Semiconductor Manufacturing International Corp, are also investing heavily to expand their production capacity this year, despite severe US export limitations. The rapid growth of AI demand has already led to a significant profit increase for Hua Hong, with the company's net profit rising 385.9 per cent year-on-year to US$38.6 million and revenue reaching a record US$717.5 million, up 26.8 per cent from a year earlier.
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