Hua Hong Semiconductor acquires Huali Microelectronics

Hua Hong Semiconductor is set to take full control of Shanghai Huali Microelectronics by acquiring an additional 97.5% stake for RMB 8.27 billion ($1.15 billion), in a strategic consolidation move within China's semiconductor industry. The announcement, made on December 31, 2025, underscores a trend of increased integration among Chinese chipmakers, aiming to strengthen their positions in the global market.

Hua Hong, which previously held a 2.5% stake in Huali, will now wholly own the company through a share issuance. The deal will entail the issuance of 191 million new shares at RMB 43.34 each, a marked 44.8% discount to the last closing price, with stakes acquired from Hua Hong Group, Shanghai Integrated Circuit Fund, Big Fund Phase II, and Guotou Pioneer Fund. This acquisition will bring Huali's capabilities, including its 65/55nm and 40nm logic and specialty process technologies, under Hua Hong's umbrella, adding 38,000 wafers per month in production capacity.

The strategic move aims to bolster Hua Hong's operational capabilities and market standing. As of the third quarter of 2025, Hua Hong ranked as the world’s sixth-largest foundry by revenue, holding a 2.6% share of the global market. The acquisition will enhance Hua Hong's technical capabilities and production capacity, positioning it to compete more effectively against rivals such as SMIC, which commands a 5.1% global market share.

The deal occurs against a backdrop of increased consolidation in China's semiconductor sector, led by major players such as SMIC, which recently announced plans to consolidate its own operations by acquiring a 49% stake in a subsidiary and injecting capital into another. These moves reflect a broader strategy among Chinese chip manufacturers to optimize resources and address challenges within the competitive global semiconductor arena.

Looking ahead, Hua Hong's acquisition positions it to pursue further expansion and technological advancements. The company plans to raise up to RMB 7.556 billion through a non-public share issuance to a select group of investors, with the funds earmarked for technology upgrades and the development of specialty processes. This aligns with the broader industry objective to scale up operations and enhance domestic production capabilities. Regulatory approvals and the successful completion of the capital raise remain key milestones in the closing of the deal.