Company Reports

As the second-largest foundry in China, Hua Hong Semiconductor focuses on providing specialty products that perform narrower sets of tasks compared with the most advanced processors. These tasks range from storing small bits of data for very long periods to regulating electricity flows. Hua Hong has no intention to offer cutting-edge chips like smartphones and data center processors, owing to financial, scale, and personnel constraints. Most of Hua Hong’s offerings are commoditized as they are fabricated on process technologies that first debuted over a decade ago. Customers can obtain a perfect or very close substitute at other chipmakers, barring major shortages, which limits Hua Hong’s pricing power.

Hua Hong Grace plans to build phase 3 of its Wuxi plant, with a capacity of 55,000 wafers per month. The plant will cost USD 6.95 billion, with equity and debt financing split 60/40. Hua Hong will retain 51% of the equity after introducing state-backed investors.

June-quarter sales and gross margins of Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor topped guidance. Both firms cited demand for peripheral chips in AI applications as the largest driver, and price hikes will continue.

As the second-largest foundry in China, Hua Hong Semiconductor focuses on providing specialty products that perform narrower sets of tasks compared with the most advanced processors. These tasks range from storing small bits of data for very long periods to regulating electricity flows. Hua Hong has no intention to offer cutting-edge chips like smartphones and data center processors, owing to financial, scale, and personnel constraints. Most of Hua Hong’s offerings are commoditized as they are fabricated on process technologies that first debuted over a decade ago. Customers can obtain a perfect or very close substitute at other chipmakers, barring major shortages, which limits Hua Hong’s pricing power.

We assess the impact on our coverage of Taiwan Semiconductor Manufacturing Company, United Microelectronics, SMIC, and Hua Hong Semiconductor after Huawei revealed its approach to improving chip performance, called Tau Scaling Law. SMIC and Hua Hong shares jumped on the news.

As the second-largest foundry in China, Hua Hong Semiconductor focuses on providing specialty products that perform narrower sets of tasks compared with the most advanced processors. These tasks range from storing small bits of data for very long periods to regulating electricity flows. Hua Hong has no intention to offer cutting-edge chips like smartphones and data center processors, owing to financial, scale, and personnel constraints. Most of Hua Hong’s offerings are commoditized as they are fabricated on process technologies that first debuted over a decade ago. Customers can obtain a perfect or very close substitute at other chipmakers, barring major shortages, which limits Hua Hong’s pricing power.

Semiconductor Manufacturing International and Hua Hong reported March quarter sales that slightly exceeded management guidance. Both firms plan to hike prices in the coming quarters as demand for artificial intelligence noncomputing chips strengthens, and non-AI demand spills over to China.

DeepSeek released a preview of its V4 model, 15 months after introducing R1—widely known as the "DeepSeek Moment." DeepSeek claims V4's capabilities largely match US models.

Hua Hong Semiconductor's share price surged as much as 12% on March 16 before slumping on March 17 after Reuters reported it is preparing for 7-nanometer chipmaking processes.

As the second-largest foundry in China, Hua Hong Semiconductor focuses on providing specialty products that perform narrower sets of tasks compared with the most advanced processors. These tasks range from storing small bits of data for very long periods to regulating electricity flows. Hua Hong has no intention to offer cutting-edge chips like smartphones and data center processors, owing to financial, scale, and personnel constraints. Most of Hua Hong’s offerings are commoditized as they are fabricated on process technologies that first debuted over a decade ago. Customers can obtain a perfect or very close substitute at other chipmakers, barring major shortages, which limits Hua Hong’s pricing power.

Semiconductor Manufacturing International Corporation, Hua Hong Semiconductor, and GlobalFoundries reported December-quarter sales that exceeded management guidance. They noted mature node chips are recovering from a multiyear inventory clearance and outlined varying tailwinds from AI.

Hua Hong's September-quarter revenue and gross margin grew 12% and 263 basis points sequentially to USD 635 million and 13.5%, respectively. Midpoints of December-quarter guidance are USD 655 million for revenue and 13% for gross margin.

Hua Hong plans to acquire its sister company Shanghai Huali Microelectronics by issuing shares at CNY 43.34 each. The final consideration has not been determined, and the deal is subject to shareholder and regulatory approval.

As the second-largest foundry in China, Hua Hong Semiconductor focuses on providing specialty products that perform narrower sets of tasks compared with the most advanced processors. These tasks range from storing small bits of data for very long periods to regulating electricity flows. Hua Hong has no intention to offer cutting-edge chips like smartphones and data center processors, owing to financial, scale, and personnel constraints. Most of Hua Hong’s offerings are commoditized as they are fabricated on process technologies that first debuted over a decade ago. Customers can obtain a perfect or very close substitute at other chipmakers, barring major shortages, which limits Hua Hong’s pricing power.

Hua Hong and Semiconductor Manufacturing International's June quarter revenue and gross margin exceeded guidance. Both firms enjoyed pretariff rush orders on top of localization demand. The duo expects sequential volume and average selling price increases in the September quarter.

As the second-largest foundry in China, Hua Hong Semiconductor, or Hua Hong, focuses on providing specialty products that perform narrower sets of tasks compared with the most advanced processors. These tasks range from storing small bits of data for very long periods to regulating electricity flows. Hua Hong has no intention to offer cutting-edge chips like smartphone and data center processors, owing to financial, scale, and personnel constraints. Most of Hua Hong’s offerings are commoditized as they are fabricated on process technologies that first debuted over a decade ago. Customers can obtain a perfect or very close substitute at other chipmakers barring major shortages, which limits Hua Hong’s pricing power.

Average selling prices, or ASP, of Hua Hong and Semiconductor Manufacturing International have fallen sequentially in the first quarter of 2025 as demand in anticipation of US tariffs was weaker than expected. Hua Hong shares slumped 9% and SMIC shares plunged 5% on May 9.

Hua Hong's fourth-quarter 2024 revenue and gross margin were USD 539 million and 11.4%, respectively, in line with guidance. Management hinted at a more aggressive approach in process node migration and affirmed plans to add monthly capacity of 300mm 83,000 wafers by the end of 2026.

As the second-largest foundry in China, Hua Hong Semiconductor, or Hua Hong, focuses on providing specialty products that perform narrower sets of tasks compared with the most advanced processors. These tasks range from storing small bits of data for very long periods to regulating electricity flows. Hua Hong has no intention to offer cutting-edge chips like smartphone and data center processors, owing to financial, scale, and personnel constraints. Most of Hua Hong’s offerings are commoditized as they are fabricated on process technologies that first debuted over a decade ago. Customers can obtain a perfect or very close substitute at other chipmakers barring major shortages, which limits Hua Hong’s pricing power.

We view the latest US export controls by the Commerce Department as having minimal impact on the foundries under our coverage. As such, we leave our fair value estimates on TSMC, UMC, GlobalFoundries, SMIC, and Hua Hong Semiconductor unchanged at TWD 1,380, TWD 70.00, USD 42.00, HKD 14.00, and HKD 16.50 per share, respectively. TSMC and UMC remain our top picks for the sector.