China's Hua Hong Prepares to Produce 7-Nanometer Chips

China's second-largest semiconductor manufacturer, Hua Hong Group, has developed 7-nanometer chip production technology for AI. The company's subsidiary Huali Microelectronics is completing the setup of the corresponding line at Shanghai's Fab 6 factory. This step is part of Beijing's strategy to reduce dependence on Western technologies.

Production Scales and Technology Partnership

By year's end, the factory plans to produce several thousand wafers per month. Huawei Technologies is actively participating in the project, assisting Hua Hong in technological development. Chinese company Biren Technology is already being considered as one of the first clients, as it has lost access to Taiwan's TSMC due to American sanctions.

Huawei's participation in the project carries particular significance. The company, which itself is under US sanctions, has accumulated significant experience in internally strengthening China's semiconductor ecosystem. Huawei's HiSilicon division is considered one of the most advanced Chinese teams in chip design.

Technical Details and Challenges

Producing 7-nanometer chips is technically very complex. Usually, technology at this level requires ASML's EUV (Extreme Ultraviolet) lithography equipment, which is inaccessible to China due to sanctions. Like SMIC, Hua Hong is trying to overcome this barrier with DUV (Deep Ultraviolet) technology, which requires complex multi-patterning processes.

This approach, while possible, significantly reduces production efficiency. Compared to Samsung's mass production of chips with 4-nanometer technology, Hua Hong's process is less efficient, though for China this is significant progress.

Expert Assessment

Semiconductor industry analysts noted that the process is difficult but inevitable. As an ASML representative stated to Reuters: "We do not comment on issues related to specific deliveries," though it is known that China is actively using existing lithography equipment to strengthen local production.

Industry experts estimate that Hua Hong's 7-nanometer chip quality and efficiency will significantly lag behind TSMC's equivalent products in the initial phase. However, from a strategic standpoint, this achievement carries enormous significance, as China is proving that sanctions cannot stop technological development.

Geopolitical Context

Hua Hong's achievement must be considered within China's technological independence strategy. Beijing has invested more than $150 billion in the semiconductor sector in recent years. The goal is clear — reduce dependence on Taiwan's TSMC and South Korea's Samsung.

US sanctions, which prohibit export to China of NVIDIA, AMD, and Intel's advanced chips, paradoxically accelerate China's local industry development. According to NVIDIA's director's statement, China's AI sector is developing rapidly, and China is surpassing the US in the AI agents field.

Impact of Sanctions

The full picture of US sanctions is complex:

Chip exports — Export of NVIDIA's A100, H100, and Blackwell series chips to China is prohibited
Lithography equipment — Supply of ASML's EUV systems has been suspended
Software — Access to EDA tools for chip design is restricted

Despite this, DeepSeek V4 and Tencent Hunyuan Turbo show that Chinese AI models achieve effective results even with available chips.

Market Reaction and Financial Results

As soon as the news spread, Hua Hong's share price sharply increased on the Hong Kong Stock Exchange. The company has already attracted $1.1 billion USD for technological modernization, which will allow China to become the second local player, after SMIC, to cross the 7-nanometer threshold.

Investor enthusiasm reflects the semiconductor market's growth trend. According to Samsung's forecast, AI development will sharply increase chip demand this year, which is also favorable for Hua Hong.

Frequently Asked Questions

What is 7-nanometer technology?

7 nanometers refers to the transistor size on a chip. The smaller this figure, the more transistors fit on the chip, increasing its power. 7nm is considered advanced technology, though leaders are already working on 3nm and 2nm technologies.

Why can't China buy ASML's EUV equipment?

Under US, Netherlands, and Japanese sanctions, ASML is prohibited from exporting EUV lithography systems to China. This restriction aims to limit China's military and intelligence organizations' access to advanced chip production.

How competitive are Hua Hong's chips?

In the initial phase, Hua Hong's 7-nanometer chips will significantly lag behind TSMC's equivalent products in efficiency. However, for China's market, where TSMC chips are inaccessible due to sanctions, they represent a significant alternative.

What impact does this have on the AI industry?

Local 7-nanometer chip production will allow Chinese AI companies to reduce dependence on imported hardware and continue AI model development even under sanctions conditions.

Which companies will be Hua Hong's first clients?

Biren Technology, a Chinese AI chip designer, is considered one of the first clients. Huawei's HiSilicon division will also likely use Hua Hong's chips.