China’s No 2 foundry Hua Hong invests US$2b in new fab to meet surging AI-driven demand

Chinese foundry Hua Hong Grace Semiconductor is dedicating US$2 billion to a significant capacity expansion in Wuxi, a hub for chip production in China. This investment aims to meet the rapidly increasing domestic demand for AI infrastructure and circumvent US tech restrictions. The funding will go towards constructing a new 12-inch specialty line, Hua Hong's third facility in Wuxi.

With full operational capacity, the expansion will add 55,000 wafers to their monthly production, a 30 percent boost to their total capacity in the city. The project is being undertaken in partnership with state-backed investment entities, including the Hua Xin Fund. The company, along with its Shanghai subsidiary, is providing US$1 billion and US$1.1 billion respectively, while state entities will contribute the remaining capital.

This move is a testament to the urgency among China's major chipmakers to expand production capacity to meet the demand for AI chips as the country pushes for self-sufficiency in semiconductor technology. Hua Hong's existing fabrication plants in Shanghai and Jiangsu are currently operating at full capacity, with a second-quarter utilisation rate of 103 percent.

The new facility, named Fab 9B, has been under construction since March and will focus on specialized technology chips used in power management, microcontrollers, and data centers. Hua Hong Chairman and President Bai Peng stated that the company did not see any impact from US export controls on equipment procurement for the new project, despite the strict controls in place.

This expansion aligns with the trend among China's largest chipmakers, including foundries like Hua Hong and Semiconductor Manufacturing International Corp, and integrated device manufacturers like Yangtze Memory Technologies Corporation and ChangXin Memory Technologies, who are aggressively investing to expand their production capacity this year.