China state funds double down on Hua Hong in legacy chip push

The Chinese government is investing heavily in the country's second-largest contract chipmaker, Hua Hong Grace Semiconductor, as part of its push for self-reliance in mature-node chips. The capital infusion, totaling billions of yuan, is being directed towards both Hua Hong's Shanghai-based parent company and a new manufacturing facility in Wuxi.

This surge in state funding reflects Beijing's efforts to strengthen domestic foundries as Washington tightens technology restrictions on China. Hua Hong's registered capital has risen from 13.5 billion yuan to 19.7 billion yuan, with state-backed investment vehicles increasing their direct and indirect stakes. The Shanghai State-owned Assets Supervision and Administration Commission, acting as the ultimate controller of Hua Hong, has also contributed 19.7 million yuan to the cause.

While U.S. restrictions have limited access to advanced chipmaking equipment, Beijing is focusing on legacy and mature-node semiconductors, which are crucial for various sectors such as electric vehicles, industrial automation, Internet of Things devices, and consumer electronics. Hua Hong has been actively investing in its third fab project in Wuxi, with its registered capital skyrocketing to $4.17 billion, up from $998,000 earlier this month.

The facility, known as Fab 9B, is expected to expand Hua Hong's monthly production capacity by 55,000 wafers, increasing its total Wuxi capacity by roughly 30% once fully operational. Despite the U.S. export controls, Hua Hong's earnings call in May indicated that the company did not see any impact on its Wuxi project.