Experts say Hua Hong, China's second-largest chip foundry, is barely affected by US sanctions and its focus on older chips could make it Beijing's new favorite
Qianer Liu / Financial Times : Tweets: @martijnrasser , @pstasiatech , @nathanbenaich , and @pstasiatech Tweets: Martijn Rasser / @martijnrasser : “Compared with SMIC, Hua Hong has adopted a different strategy of optimising its manufacturing techniques for the mature “nodes”, or generations, of its less-miniaturised chips in order to maximise the performance and reliability of its products.” https://www.ft.com/... Paul Triolo / @pstasiatech : Hua Hong gives China new hope with old chip technology Already listed in Hong Kong, China's second-largest chip foundry received regulatory approval last month for a $2.5bn secondary listing in Shanghai on the tech-centric Star Market. https://www.ft.com/... Nathan Benaich / @nathanbenaich : “Many Chinese customers have replaced imported modules with homegrown ones since geopolitical tensions escalated,” https://www.ft.com/... Paul Triolo / @pstasiatech : Hua Hong's lack of cutting-edge tech has proven a boon rather than a handicap of late. During its Q3 earnings call in November, company said it had been barely affected by actions of the US, as the chips it produces are several generations older than the latest microprocessors.
Context & Ripple Effects
While Huawei and SMIC work around US sanctions to keep advanced-node ambitions alive, Hua Hong has taken the opposite path: it optimizes manufacturing for mature nodes — 65nm and above — where American export controls simply do not reach, and reports being barely affected by the restrictions. The related coverage shows Beijing rewarding that positioning, with regulatory approval for a $2.5bn secondary listing on Shanghai's Star Market adding a domestic capital channel alongside its Hong Kong listing.
The strategy is not just defensive. Weeks after this report, Hua Hong signed a $6.7B wafer fab deal for 65nm, 55nm, and 40nm chips, signaling that China is deliberately pivoting investment away from sub-14nm technology — a bet that reliable older chips, not frontier nodes, are where self-sufficiency can actually be won.
First-order effects
- Hua Hong keeps full access to equipment and customers that sanctioned rivals like SMIC lose, and gains a fresh domestic fundraising route through its approved Star Market listing.
- Chinese customers already substituting homegrown modules for imported ones give Hua Hong a captive demand base in automotive, industrial, and power chips.
Second-order effects
- Beijing's capital allocation follows the sanction-proof path: the $6.7B mature-node fab commitment shows state-backed money flowing to Hua Hong's segment rather than to sub-14nm projects that controls can choke.
- SMIC is squeezed into a harder trade-off — defending its advanced-node work against tightening controls while ceding the politically favored, lower-risk mature-node lane to Hua Hong.
Third-order effects
- If the pattern holds, China's semiconductor policy bifurcates: a well-funded, sanctions-immune mature-node industry built around players like Hua Hong, running parallel to costlier, evasion-dependent frontier attempts by Huawei-linked networks such as its stealthy domestic supply chain partners.
- The ghost of HSMC and QXIC — state-funded fabs that never produced chips — warns that pouring capital into mature nodes risks duplicating capacity without demand, making Beijing's 'new favorite' status a test of whether subsidies now select for viable operators.
The trend: US export controls are pushing China to consolidate semiconductor investment around mature-node foundries that sanctions cannot touch, with Hua Hong as the template.