China’s top contract chipmakers pursue acquisitions amid Beijing’s self-sufficiency drive

Hua Hong Semiconductor, China’s No 2 contract chipmaker, on Wednesday announced the acquisition of its sister foundry in Shanghai, days after market leader Semiconductor Manufacturing International Corp (SMIC) said it would take full control of a subsidiary.

Those big-ticket transactions – 8.27 billion yuan (US$1.2 billion) for Hua Hong and 40.6 billion yuan for SMIC – signalled a fresh round of consolidation in the country’s semiconductor industry, as Beijing’s tech self-sufficiency drive gathered pace amid heightened rivalry between China and the US.

Hua Hong said it would acquire a 97.5 per cent equity interest in Shanghai Huali Microelectronics from its state-owned parent Hua Hong Group, as well as investment funds that include the Shanghai Integrated Circuit Industry Fund, the Shanghai Guotou Pioneer Fund and phase two of the China Integrated Circuit Industry Investment Fund, also known as “Big Fund”.

The acquisition would help Hua Hong add a monthly production capacity of 38,000 65-nanometre and 40-nm chips, boosting its asset base and profitability, according to a filing with the Hong Kong stock exchange.

SMIC had earlier announced that it would acquire the remaining 49 per cent stake it does not own in subsidiary Semiconductor Manufacturing North China (Beijing) Corp. (SMNC). The deal was first proposed in September.