China’s 2nd Largest Semiconductor Firm Hua Hong Advances 7nm Chip Production
China's second-largest chipmaker prepares its Shanghai fab for advanced node output, with Huawei's backing signaling a coordinated push toward domestic AI chip self-sufficiency.
China’s Hua Hong Group, the country’s second-largest chipmaker, has developed advanced chip manufacturing technologies capable of producing artificial intelligence chips, a significant milestone in Beijing’s push for technological independence.
According to Reuters, citing four anonymous sources familiar with the matter, the group’s contract chipmaking arm, Huali Microelectronics, is readying a 7-nanometer process at its Shanghai plant.
The development, reported March 16, 2026, positions China to expand its advanced semiconductor production base amid sustained geopolitical pressure on its technology supply chain.
Huali Microelectronics Targets 7nm Production
Reuters reported that Huali’s research and development on the Hua Hong 7nm chip at its Fab 6 facility began last year, with support from domestic equipment suppliers including Huawei-backed SiCarrier, which tested equipment at a Shenzhen facility. The report confirmed that Huawei Technologies has been collaborating directly with Huali on the 7nm technologies.
Huali aims for production capacity of a few thousand wafers per month by year-end, with a larger ramp-up planned thereafter. According to The News International, Chinese GPU designer Biren, blacklisted by the United States, is already using Huali’s 7nm line for tape-out, the process of committing a chip design to a physical prototype before mass production.
The development followed Hua Hong Semiconductor’s December announcement of a planned controlling stake acquisition in Huali, alongside a 7.56 billion yuan ($1.10 billion) fundraise for technological upgrades.
However, Reuters noted it could not determine how the advanced manufacturing capability was achieved, its production yield efficiency, or which major equipment suppliers were involved.
China’s Semiconductor Self-Sufficiency
The move comes as Beijing accelerates China’s AI chip production to reduce reliance on foreign suppliers, even after Washington eased certain export restrictions, allowing Nvidia to resume limited AI chip sales in China.
Until now, the county’s largest semiconductor foundry, SMIC, has been the only domestic foundry capable of 7nm production, a dynamic being mirrored globally, as seen in Micron’s recent $1.8B Taiwan chip facility acquisition for advanced AI chip output.
Hua Hong’s entry at this process node significantly expands advanced manufacturing capacity and reduces single-point dependency in the country’s semiconductor industry.
Hua Hong’s Fab 6 in Shanghai currently produces logic chips at 22 nm and 28 nm nodes. The leap to 7 nm marks a major generational advancement and underscores China’s accelerating domestic semiconductor capabilities toward self-sufficiency.
Hua Hong Shares Jump on News
Markets responded swiftly to this report. According to Investing.com, Hong Kong-listed Hua Hong shares jumped 5.3% to HK$92.65, while Shanghai-listed stocks rose 2.1% to 121.65 yuan. However, Hua Hong Group, Huali, Hua Hong Semiconductor, and Huawei did not respond to Reuters’ requests for comment.
The market reaction comes as SMIC continues to rely on Dutch chip equipment maker ASML’s immersion machines for 7 nm production, where yields, the number of good chips per wafer, have remained weak.
Earlier this month, Chinese executives called for domestic alternatives to ASML to reduce foreign dependence, as reported by Yahoo Finance, a development that may have contributed to the positive investor sentiment.
AI Chip Race Reshapes China’s Ecosystem
For chip designers under U.S. export restrictions, Biren’s use of Huali’s 7nm line demonstrates how expanding domestic foundry capacity can serve as a viable alternative for Chinese firms cut off from Western suppliers.
As reported by Seeking Alpha, Hua Hong’s milestone signals China’s accelerating development of advanced chip manufacturing technologies targeting AI applications. A broader Huali capacity ramp would further strengthen Beijing’s position in technology trade negotiations and gradually reduce the leverage of foreign export controls.
Enterprises relying on China-based AI infrastructure may increasingly find that domestically produced chips at advanced nodes form a larger share of available supply.
However, analysts noted that equipment, yield rates, and mass-production economics remain critical unknowns before 7nm output can substitute for global advanced fabs
What’s Next For Shanghai Fab 6 Ramp-up
Huali Microelectronics is targeting an initial 7nm production capacity of several thousand wafers per month by end-2026, with a broader ramp to follow, per Reuters sources.
Investors will closely watch whether Hua Hong Semiconductor’s planned acquisition of a controlling stake in Huali proceeds following the December announcement.
Regulatory scrutiny from Washington and allied governments over China’s advanced chip progress is expected to intensify as the Fab 6 milestone becomes more widely known. Ultimately, this expansion signals a new era of silicon sovereignty that could permanently shift the global balance of tech power.
