China's Top Foundries Consolidate Assets to Bolster Chip Self-Sufficiency
SMIC and Hua Hong are executing major acquisitions to tighten control over domestic manufacturing as China aggressively expands mature node capacity.
China’s leading semiconductor foundries are restructuring their asset holdings to consolidate control over critical manufacturing infrastructure. SMIC and Hua Hong are leading a wave of acquisitions designed to streamline domestic production and reduce reliance on foreign technology.
To fully integrate its operations, SMIC is acquiring the remaining 49% equity interest in SMIC North (SMNC). This transaction involves the issuance of shares to various stakeholders, including the National Integrated Circuit Industry Investment Fund, known as the Big Fund. As a direct result of the SMNC deal, the Big Fund's H-share ownership in SMIC has nearly doubled, increasing from 4.79% to 9.25%.
Simultaneously, Hua Hong is expanding its footprint by acquiring a 97.5% equity stake in Hua Li Microelectronics (HLMC) for approximately CNY 8.27 billion. This acquisition transforms HLMC into a wholly owned subsidiary and significantly boosts Hua Hong's production capabilities. The deal adds roughly 38,000 wafers per month of capacity across 40nm, 55nm, and 65nm nodes to Hua Hong's existing operations.
The Push for Self-Sufficiency
These corporate maneuvers are part of a broader national strategy to achieve semiconductor self-sufficiency. For years, the Chinese government has utilized the Big Fund to aggressively finance the industry, aiming to decouple from the dominance of U.S. and Taiwanese firms like TSMC. While early efforts focused on the rapid construction of new fabrication plants, the current strategy has shifted toward consolidating existing assets and upgrading mature nodes—specifically those at 28nm and above.
This shift is further evidenced by massive capital expenditures from other domestic players. Nexchip has broken ground on its Phase IV project in Hefei, representing an investment of CNY 35.5 billion. The project targets a 12-inch production line capable of producing 55,000 wafers per month for 28nm and 40nm nodes.
Strategic Implications
By securing and consolidating mature node capacity, China is insulating its industrial and automotive sectors from global supply chain volatility. While high-end chips remain subject to stringent export controls, the 40nm to 65nm range is essential for the automotive, AI, and consumer electronics markets. Streamlining the management of these assets under state-backed entities ensures a stable supply of the "workhorse" chips that underpin economic stability.
Future Outlook
Industry observers are now watching for further integration across the domestic supply chain. The current trend suggests that China will continue to prioritize the mastery of mature processes to ensure that critical infrastructure is not dependent on external vendors. Whether these consolidated entities can maintain efficiency while under increased state influence remains a key point of analysis for the global semiconductor market.