China Advances Toward Domestic 7 nm Chip Production

• China’s Hua Hong Group is preparing to manufacture 7 nm chips as part of Beijing’s push for technological self‑reliance.
• The company’s Huali Microelectronics unit is developing a process that would make it China’s second foundry with this capability.
• Its progress comes amid shifting U.S. export controls and growing domestic demand for homegrown semiconductor solutions.

A New Milestone in China’s Semiconductor Strategy

China’s Hua Hong Group has reportedly developed the technology needed to produce 7‑nanometre chips, marking a significant step in the country’s long‑running effort to reduce dependence on foreign semiconductor suppliers. Sources familiar with the matter say the company’s contract manufacturing arm, Huali Microelectronics, is preparing to introduce the advanced process at its Shanghai facility. This development would position Hua Hong as the second Chinese chipmaker capable of producing 7 nm chips, following Semiconductor Manufacturing International Corporation (SMIC). The achievement aligns with Beijing’s broader strategy to strengthen domestic chipmaking capacity amid ongoing geopolitical and trade pressures.

The timing is notable, as the United States has eased certain export restrictions, allowing Nvidia to sell some of its less powerful AI chips to China. Even with this partial relief, Chinese authorities continue to encourage local companies to prioritize domestic alternatives. This policy push reflects concerns about long‑term access to foreign technology and the need to secure supply chains for critical components. Hua Hong’s progress therefore represents both a technical milestone and a strategic asset for China’s semiconductor ambitions.

Collaboration and Unanswered Questions

While the details of Hua Hong’s technological breakthrough remain unclear, several sources suggest that Huawei Technologies has collaborated with the company on its 7 nm development. Huawei has been heavily investing in semiconductor research since facing U.S. trade restrictions, making such cooperation plausible. Reuters was unable to determine how Hua Hong achieved the necessary manufacturing efficiency or which equipment suppliers contributed to the process. The company has not publicly commented on the reports, and neither have its subsidiaries or Huawei.

SMIC, China’s leading contract chipmaker, currently relies on immersion lithography machines from Dutch supplier ASML to produce 7 nm chips. Analysts say SMIC’s yields remain relatively low, highlighting the challenges of achieving stable production at this scale without access to the most advanced lithography tools. ASML has declined to comment on equipment deliveries, consistent with its policy of not discussing customer‑specific matters. Hua Hong’s ability to reach similar technological levels without clear access to comparable tools raises questions that industry observers are still trying to answer.

Test Production and Early Applications

Huali’s research and development work on 7 nm chips began last year at its Hua Hong Fab 6 facility, according to one source. The effort reportedly involved support from domestic equipment suppliers, including SiCarrier, a company backed by Huawei that tested its tools in Shenzhen in 2023. Hua Hong Semiconductor announced in December that it planned to acquire a controlling stake in Huali and raise 7.56 billion yuan (about $1.10 billion) to fund upgrades and research at the foundry. These investments appear to have accelerated the company’s progress toward advanced manufacturing capabilities.

Initial production capacity is expected to reach a few thousand wafers per month by the end of the year, with plans to scale up further. One early customer is said to be Biren, a Chinese GPU designer that lost access to Taiwan Semiconductor Manufacturing Company (TSMC) after being placed on a U.S. trade blocklist in 2023. Biren is reportedly using Huali’s 7 nm line for tape‑out, the stage where a chip design is finalized into a physical prototype. This partnership illustrates how domestic chipmakers are becoming increasingly important for Chinese firms affected by international trade restrictions.

Positioning Within China’s Foundry Landscape

Hua Hong Fab 6 is the most advanced facility within the Hua Hong Group, which operates seven foundries in total. The plant currently manufactures logic chips using 22 nm and 28 nm process technologies, according to the company’s website. Its Fab 5 facility, by contrast, focuses on mature nodes ranging from 40 nm to 55 nm. The introduction of a 7 nm process would significantly expand the group’s technological portfolio and enhance its competitiveness within China’s semiconductor ecosystem.

The broader context includes China’s ongoing efforts to build a resilient supply chain for advanced chips, particularly those used in artificial intelligence, high‑performance computing, and telecommunications. Domestic firms have been under pressure to innovate rapidly as access to foreign technology becomes increasingly uncertain. Hua Hong’s progress, if confirmed, would represent a meaningful step toward narrowing the gap with global leaders, even if challenges remain in scaling production and improving yields.

China’s push for semiconductor independence has accelerated since 2019, when several major tech firms—including Huawei—were added to U.S. trade denylists. This shift has led to increased investment in domestic chip design, manufacturing equipment, and materials. Interestingly, some analysts note that China’s progress at older process nodes has been faster than expected, suggesting that incremental improvements across the supply chain may be enabling more advanced breakthroughs than previously assumed.