BUSINESS

China’s No. 2 Chip Foundry to Absorb Chipmaking Sibling in State-Backed Consolidation

Published: Aug. 19, 2025 4:25 a.m. GMT+8

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Hua Hong Group ranked as the world’s sixth largest and the Chinese mainland’s second-largest contract chipmaker in the first quarter of 2025, holding a 2.7% market share

Hua Hong Semiconductor Ltd., the Chinese mainland’s second-largest contract chip manufacturer, is moving to acquire a controlling stake in a sister company, a deal in line with Beijing’s drive to consolidate and streamline the country’s semiconductor sector.

Trading of Hua Hong Semiconductor in Shanghai was halted Monday as the company unveiled plans to purchase a controlling stake in Shanghai Huali Microelectronics Corp. (Huali Micro) through a mix of newly issued stock and cash. The transaction, announced late Sunday, still requires board and regulatory approvals.

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Hua Hong Semiconductor plans to acquire a controlling stake in Shanghai Huali Microelectronics to reduce business overlap and internal competition, pending board and regulatory approvals.
The deal aligns with Beijing’s push to consolidate China’s semiconductor sector; Hua Hong Group is the world’s sixth largest and China’s second-largest contract chipmaker with a 2.7% market share (Q1 2025).
Hua Hong posted Q2 2025 revenue of $566 million (up 18.3% YoY), with a net loss narrowed to $32.8 million.

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Who’s Who

Hua Hong Semiconductor Ltd.: Hua Hong Semiconductor Ltd. is mainland China's second-largest contract chip manufacturer, aiming to acquire a controlling stake in sister company Shanghai Huali Microelectronics Corp. (Huali Micro). This acquisition aligns with Beijing's semiconductor sector consolidation efforts. After a price war in 2024, the company is in recovery, reporting $566 million in Q2 2025 revenue.

Shanghai Huali Microelectronics Corp. (Huali Micro): Shanghai Huali Microelectronics Corp. (Huali Micro) is a sister company to Hua Hong Semiconductor Ltd., both controlled by state-owned Hua Hong Group. Founded in 2010, Huali Micro specializes in advanced chip manufacturing, operating a 12-inch wafer production line (Fab 5) with a monthly capacity of 35,000 wafers. This fab supports 65/55nm, 40nm, and 28nm process nodes.

Shanghai Hua Hong (Group) Co. Ltd.: Shanghai Hua Hong (Group) Co. Ltd. (Hua Hong Group) is the parent company of Hua Hong Semiconductor Ltd. and Shanghai Huali Microelectronics Corp. It is a state-owned entity and ultimately controls both companies. According to market research, the Hua Hong Group was the sixth-largest contract chipmaker globally in Q1 2025, holding a 2.7% market share.

The Shanghai Integrated Circuit Industry Investment Fund Co. Ltd.: The Shanghai Integrated Circuit Industry Investment Fund Co. Ltd. is a state-linked investor involved in the acquisition of Shanghai Huali Microelectronics Corp. (Huali Micro) by Hua Hong Semiconductor Ltd. This fund, along with other entities like the National Integrated Circuit Industry Investment Fund, will sell its stake in Huali Micro as part of the deal.

The second phase of the National Integrated Circuit Industry Investment Fund Co. Ltd.: The second phase of the National Integrated Circuit Industry Investment Fund Co. Ltd. is one of the state-linked investors involved in the proposed acquisition of a controlling stake in Shanghai Huali Microelectronics Corp. by Hua Hong Semiconductor Ltd. This transaction is part of Beijing's strategy to consolidate and streamline China's semiconductor sector.

the Shanghai State-Owned Capital Investment Co. Ltd.: The Shanghai State-Owned Capital Investment Co. Ltd. is a state-linked investor that is part of a consortium. This consortium is selling a controlling stake in Shanghai Huali Microelectronics Corp. to Hua Hong Semiconductor Ltd. Additionally, it is a private equity fund manager.

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What Happened When

April 2011：: Huali Micro launched the Fab 5 plant in Shanghai, the Chinese mainland’s first fully automated 12-inch wafer production line.

2024：: Hua Hong Semiconductor experienced a bruising price war over mature-node chips, resulting in financial losses.

First quarter of 2025：: Hua Hong Group ranked as the world’s sixth largest and the Chinese mainland’s second-largest contract chipmaker, with a 2.7% market share.

Second quarter of 2025：: Hua Hong Semiconductor posted revenue of $566 million, up 18.3% from a year earlier, with a net loss of $32.8 million, narrower than the $41.75 million loss reported in 2024.