China's #2 chipmaker reportedly starts 7nm production

China is apparently expanding the production capacity of its most modern chip manufacturing generation. The chip manufacturing division of the Hua Hong Group can now reportedly produce 7-nanometer class chips. Production is expected to ramp up by the end of the year, albeit on a small scale: several thousand wafers per month by the end of 2026 are mentioned.

For comparison: The world market leader TSMC exposes around 1.3 million wafers per month (including older and newer manufacturing processes). Currently, TSMC with 2nm structures is three complete generations ahead.

The news agency Reuters reports on the 7nm production at the Hua Hong Group, citing sources familiar with the process. Many details about Hua Hong's chip manufacturing are not known. However, it is plausible that the company is adopting SMIC's 7nm manufacturing process.

SMIC is the largest Chinese contract chip manufacturer. Globally, it ranks third; according to market observer Trendforce, SMIC generated approximately US$9.3 billion in revenue in 2025. This corresponds to a global market share of 5.3 percent. China's number 2, Hua Hong, ranks sixth worldwide with an annual revenue of US$4.5 billion.

Huawei is likely pulling the strings

According to Reuters, Huawei is said to have been involved in Hua Hong's 7nm chip production. Huawei is also reportedly operating its own semiconductor plants, also in cooperation with SMIC. The Chinese government is overseeing the domestic semiconductor industry. SMIC's manufacturing technology is said to have been copied from TSMC's first 7nm generation (N7), according to earlier reports.

This generation still works without an extreme ultraviolet (EUV) exposure source. The sole manufacturer of EUV lithography systems, ASML, is not permitted to sell such systems to China due to export restrictions. Since China's own lithography systems are currently suitable for manufacturing processes down to the 28nm generation, older ASML systems might also be used at Hua Hong. They are sufficient for 7nm structures if a wafer is exposed multiple times (multi-patterning).

However, multiple exposures negatively impact yield as they increase the defect rate. High alignment accuracy helps, but ASML is also not allowed to sell its best lithography systems to China in this discipline. The limit is an accuracy of 1.5 nm; less than 1 nm is already possible.

Hua Hong's capacity of functional 7nm chips by the end of the year is likely to be sufficient primarily for small-scale production. According to Reuters, the Chinese GPU manufacturer Biren intends to use the 7nm line. A focus on Chinese AI accelerators, where costs would be less relevant than for smartphone processors, would also be conceivable.

(mma)