China’s second-largest semiconductor manufacturer, Hua Hong Group, has successfully created sophisticated chip production technology capable of manufacturing artificial intelligence processors, according to four sources with knowledge of the development.
The company’s contract manufacturing division, Huali Microelectronics, is preparing to launch 7-nanometer chip production at its Shanghai facility, sources revealed. This achievement would position Hua Hong as the second Chinese manufacturer to possess such cutting-edge capabilities.
Currently, SMIC stands as China’s only domestic producer with the ability to manufacture 7-nanometer chips, making this development particularly significant for Beijing’s technology independence goals.
This advancement follows Washington’s partial relaxation of technology export restrictions last year, which permitted Nvidia to market its second-tier AI processors to Chinese companies.
However, despite these regulatory changes, Beijing continues pushing domestic companies to choose locally-produced alternatives as part of its strategy to reduce dependence on international suppliers.
Reuters was unable to confirm the specific methods Hua Hong used to achieve this manufacturing breakthrough, the production efficiency levels, or which equipment suppliers participated in the development process.
Three sources indicated that Chinese technology leader Huawei Technologies has been working alongside the chipmaker on these 7-nanometer technologies. All sources requested anonymity due to the confidential nature of the information.
Neither Hua Hong Group, Huali, sister company Hua Hong Semiconductor, nor Huawei provided responses to comment requests.
Industry analysts note that while SMIC employs Dutch equipment manufacturer ASML’s immersion systems for 7-nanometer chip production, their manufacturing yields—the percentage of functional chips produced per silicon wafer—continue to underperform.
ASML declined to discuss delivery-related inquiries.
Development work on Huali’s 7-nanometer chips at the Hua Hong Fab 6 facility commenced last year, with assistance from Chinese equipment providers including SiCarrier, which has Huawei backing. SiCarrier conducted equipment trials at a Shenzhen location in 2023, according to an additional source. SiCarrier did not respond to comment requests.
This progress came after Hua Hong Semiconductor announced in December its intention to purchase a majority interest in Huali while securing an additional 7.56 billion yuan ($1.10 billion) for technology improvements and foundry research.
Two sources report that Huali expects to achieve initial 7-nanometer production capacity of several thousand wafers monthly by December, with plans for subsequent expansion.
Chinese graphics processing unit developer Biren is utilizing Huali’s 7-nanometer production line for tape-out procedures, where chip designs are converted into physical prototypes for testing prior to full-scale manufacturing, one source confirmed.
After being added to a U.S. trade restriction list in 2023, Biren lost manufacturing access to TSMC services. Biren did not provide comment responses.
The Hua Hong Fab 6 represents the most sophisticated of seven manufacturing facilities within the Hua Hong Group and currently produces logic chips using 22-nanometer and 28-nanometer processes, company information shows.
In comparison, the company’s Fab 5 facility creates chips using established technologies spanning 40-nanometer to 55-nanometer processes.
