China FAB Expansion - SMIC and Hua Hong

[Barnsley]

Despite technological restrictions from the US and its allies, SMIC and Hua Hong Semiconductor remain dedicated to investment and continue to expand their production capacity, highlighting China's resilience and adaptivity.

A recent TechInsights report indicates that after several years of growth, China's demand for chip manufacturing equipment is projected to decline in 2025. This decrease, driven by overcapacity and US sanctions, will see a drop in spending on wafer manufacturing equipment, the first since 2021.

According to TechInsights, China has led the world in producing wafer fabrication equipment, making up nearly 40% of the market, with expenditures of US$41 billion over the past two years. However, due to export controls and domestic overcapacity, spending in China is expected to decline to US$38 billion in 2025, decreasing its market share to 20%, with an annual drop of about 6%.
Overall, SEMI forecasts strong growth in the global semiconductor equipment market, driven by AI advancements and investments in mature process technologies. From 2025 to 2027, spending on 12-inch wafer fabrication equipment worldwide is projected to hit a record US$400 billion.

SMIC and Hua Hong investment plans​

SMIC, China's leading foundry, continues to expand its capacity. Co-CEO Haijun Zhao recently announced that despite facing equipment bans from the US and the Netherlands, SMIC plans to spend around US$7.5 billion on capex in 2025, with the goal of adding one fab per year, producing about 50,000 12-inch wafers annually.

SMIC, which generates 89% of its total revenue from China, is optimistic about China's automotive chip market and has set up a fab dedicated to producing these chips. The company is currently certifying automotive and industrial-grade products. In the fourth quarter of 2024, automotive chips are projected to make up 8% to 10% of SMIC's revenue and stabilize at around 10% as they collaborate with more vehicle manufacturers, meeting one-third of local demand.

Supported by the Chinese government's stimulus program, SMIC anticipates a 20% to 25% growth in orders, particularly driven by large-screen television and the 8-inch wafer demands. The company expects to outperform its peers in the same market segments in 2025, benefiting from industry chain transformations and policy advantages.

On another note, Hua Hong Semiconductor is expanding its capacity, with newly-appointed president Peng Bai announcing a shift from mature processes like 65nm and 55nm to 28nm processes. The company plans to advance these processes to 28nm and 22nm in the coming years to meet market demands.

Hua Hong Semiconductor is expanding its Wuxi production lines to reach a monthly capacity of 20,000 12-inch wafers by 2025.

These guys barely making a penny!!!

Hence why taking on Companies not run on business lines is very very challenging.

• https://www.digitimes.com/news/a202...ic-manufacturing-capacity-equipment-2025.html

 

[Paul2]

And this confirms, newer ASML immersion steppers are reaching Chinese fabs in sufficient numbers to add 50k WPY of capacity, which means dozens of new steppers per year.

Either sanctions are not reaching used equipment vendors at all, or they are not being extended on them intentionally.

 

[Barnsley]

And this confirms, newer ASML immersion steppers are reaching Chinese fabs in sufficient numbers to add 50k WPY of capacity, which means dozens of new steppers per year.

Either sanctions are not reaching used equipment vendors at all, or they are not being extended on them intentionally.

Not thought of that!

Cannot expand without circumventing the sanctions

 

[kingmouf]

It seems to me that while US sanctions under the false pretend of national security and overall warmongering are generally restricting the sales of american companies to China, China's own companies are laughing all the way to the bank. The automotive sector (a peaceful sector one could say) practically uses now only (or mostly) entirely made chinese semiconductors and are rapidly becoming world leaders (I think BYD is now the largest EV manufacturer). Western companies are left scratching their heads and are deprived access to the chinese market. Which market makes a significant shift towards other products - and this is not only for nationalistic reasons.... Other actions reported in this forum are also telling.... deepseek and supercomputing efforts indicate that there are other routes to achieve maybe not the highest but at least sufficient enough performance and the icing on the cake is that they are all provided as open source instead of the patent minefield that american companies are used to. This creates a general problem as those open source efforts are globally accessible and are potentially lowering the bar to enter fields that were walled gardens. EU's effort on the european processor initiative for example may have to face a lower performance bar to be able to perform something competitive and other initiatives from different competitors. I do not really know where this all will lead, but I am afraid that if the chinese make a real breakthrough of semiconductor equipment that will allow them to manufacture efficiently and even more profitably, this will put chinese companies at major advantages. This is not easy to happen, but there is both will and necessity and for sure there is enough funding available to achieve this. We are in 2020's, it is not that knowledge is so much restricted as in 100 years earlier.

 

[osnium]

I do not really know where this all will lead, but I am afraid that if the chinese make a real breakthrough of semiconductor equipment that will allow them to manufacture efficiently and even more profitably, this will put chinese companies at major advantages. This is not easy to happen, but there is both will and necessity and for sure there is enough funding available to achieve this. We are in 2020's, it is not that knowledge is so much restricted as in 100 years earlier

Given all the talent, focus and money in China, it’s inevitable that they will take the lead in semiconductor equipment and technology. Most US technical talent is now composed of immigrants and as the US is forced to cut science budgets for debt reasons, talented immigrants will not come here to study. The generation of US engineers who created technical breakthroughs is either retiring or have gotten let go.

To follow up on your observations, if Intel was allowed to sell Intel Foundries to SMIC and TD was transferred to China five years ago and there were no sanctions on equipment, one could anticipate that SMIC would be the leading foundry today due to the talent and money in China.

 

[fatfat]

On another note, Hua Hong Semiconductor is expanding its capacity, with newly-appointed president Peng Bai announcing a shift from mature processes like 65nm and 55nm to 28nm processes. The company plans to advance these processes to 28nm and 22nm in the coming years to meet market demands.

Dr. Bai joined Intel (US) in 1991 as an TD engineer, left Intel in 2022 as Corporate Vice President in charge of Intel Logic Technology Development. During his 31 years at Intel, Dr. Bai led Intel cutting edge Logic technologies from R&D to mass production, completed development of multiple generations advanced logic technologies, guided development and mass production of multiple generations of SoC, eDRAM and eNVM technologies, managed Intel D1C Fab and Intel Oregon TD Fabs, and took charge of Intel's supply chain management with achieving Intel's global supply chain transformation.

source:

SEMICON China - Dr. Peng Bai

 

[samwilde]

And this confirms, newer ASML immersion steppers are reaching Chinese fabs in sufficient numbers to add 50k WPY of capacity, which means dozens of new steppers per year.
Either sanctions are not reaching used equipment vendors at all, or they are not being extended on them intentionally.

Only the most advanced immersion steppers are now banned from sale to China. The lower end immersion steppers used for 28nm are still available. You also have blacklists with regards to certain fabs like SMIC's FinFET fab which supposedly cannot get much of anything. And yet Huawei keeps selling more products with FinFET chips. It is as if they figured out some way to continue servicing and operating those machines they do have even if blacklisted.

 

[Paul2]

Only the most advanced immersion steppers are now banned from sale to China. The lower end immersion steppers used for 28nm are still available. You also have blacklists with regards to certain fabs like SMIC's FinFET fab which supposedly cannot get much of anything. And yet Huawei keeps selling more products with FinFET chips. It is as if they figured out some way to continue servicing and operating those machines they do have even if blacklisted.

Used equipment vendors

 

[Barnsley]

Only the most advanced immersion steppers are now banned from sale to China. The lower end immersion steppers used for 28nm are still available. You also have blacklists with regards to certain fabs like SMIC's FinFET fab which supposedly cannot get much of anything. And yet Huawei keeps selling more products with FinFET chips. It is as if they figured out some way to continue servicing and operating those machines they do have even if blacklisted.

We are back!!

Have you been on holiday?

 

[Jert]

I believe China will continue to build capacity for >/= 28nm nodes, perhaps slow down slightly but not by much, until its capacity is at least 3-5x of the GLOBAL demand. They did this in steel, ships, solar, EV and numerous other industries or segments... and will do it again in mature node semiconductors. SMIC and HuaHong are just two of the more known names, numerous fabs were built and equipped in the last 2-3 years with 50K or more capacity. They believe it's a successful formula, to dominate and decimate ANY competition from the rest of the world, so that CCP can control and make rest of the world its slaves - its ultimate mission.

China foundries are blocked off from FinFET, essentially 7nm and below, but everyone here knows they are making 7nm albeit very limited quantities (in contrast to its large demands). Their abilities to move down to 5nm and below is essentially impossible for now without access to EUV but they are betting to soon leverage their mature node capacity choke point to force the West to perhaps negotiate some loosening of EUV restrictions.

To counter the risk, I think it's fundamental for the West to not give up investments on mature nodes. But unfortunately in a capitalist ROI based Western world, it's easier said than done... Fingers crossed. We are living in intriguing times, indeed.

 

[benb]

I believe China will continue to build capacity for >/= 28nm nodes, perhaps slow down slightly but not by much, until its capacity is at least 3-5x of the GLOBAL demand. They did this in steel, ships, solar, EV and numerous other industries or segments... and will do it again in mature node semiconductors. SMIC and HuaHong are just two of the more known names, numerous fabs were built and equipped in the last 2-3 years with 50K or more capacity. They believe it's a successful formula, to dominate and decimate ANY competition from the rest of the world, so that CCP can control and make rest of the world its slaves - its ultimate mission.

China foundries are blocked off from FinFET, essentially 7nm and below, but everyone here knows they are making 7nm albeit very limited quantities (in contrast to its large demands). Their abilities to move down to 5nm and below is essentially impossible for now without access to EUV but they are betting to soon leverage their mature node capacity choke point to force the West to perhaps negotiate some loosening of EUV restrictions.

To counter the risk, I think it's fundamental for the West to not give up investments on mature nodes. But unfortunately in a capitalist ROI based Western world, it's easier said than done... Fingers crossed. We are living in intriguing times, indeed.

It's a good analysis of a good strategy which will probably succeed. It's not a coincidence, many leaders like Peng Bai, very experienced, know the scale at all costs, grab market share, then monetize later model well, because it's a Silicon Valley's model. The context seems foreign because it's usually not applied to capital intensive industries. And because we view this in a darker light when in fact it's the sincerest form of flattery--imitation.

So, why is this, is my question? There has never been a second Silicon Valley, like this, a peer competitor, I think. I think SV forgot to think about the possibility of a peer.