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 address business overlap and internal competition.
The deal, involving state-linked investors, aligns with Beijing's semiconductor consolidation drive and may sharpen each firm's strategic focus.
In Q2 2025, Hua Hong Semiconductor reported $566 million in revenue (up 18.3% YoY), a 10.9% gross margin, and a reduced net loss of $32.8 million.

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Who’s Who

Hua Hong Semiconductor Ltd.: Hua Hong Semiconductor Ltd. is China's second-largest contract chip manufacturer. It is acquiring a controlling stake in sister company Shanghai Huali Microelectronics Corp. (Huali Micro) to eliminate business overlap and internal competition within the state-owned Hua Hong Group. This acquisition will allow Hua Hong Semiconductor to focus on mature and specialty processes, while Huali Micro will pursue advanced logic chips.

Shanghai Huali Microelectronics Corp.: Shanghai Huali Microelectronics Corp. (Huali Micro) is a Chinese contract chip manufacturer, founded in 2010. It specializes in more advanced chip manufacturing, operating Fab 5, the first fully automated 12-inch wafer production line on the Chinese mainland. Huali Micro supports 65/55nm, 40nm, and 28nm process nodes. It is a sister company to Hua Hong Semiconductor Ltd., and both are ultimately controlled by the state-owned Hua Hong Group.

Shanghai Hua Hong (Group) Co. Ltd.: Shanghai Hua Hong (Group) Co. Ltd. is the parent company of Hua Hong Semiconductor Ltd. (the Chinese mainland's second-largest contract chip manufacturer) and Shanghai Huali Microelectronics Corp. The group aims to consolidate and streamline the country's semiconductor sector, with Hua Hong Semiconductor seeking to acquire a controlling stake in its sister company, Huali Micro.

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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.