The investment momentum of China’s Big Fund Phase II shows no signs of slowing down, with its latest investment directed at Shanghai Huali Microelectronics Co., Ltd. (HLMC), a subsidiary of Huahong Group.

According to Sina Finance’s report, this substantial investment of up to USD 1 billion will support HLMC in continuous development of advanced process technologies and enhancing its manufacturing capabilities.

Given industry reports from as early as 2020 suggesting HLMC has progressed to the 14nm process, this investment from the Big Fund II signifies China’s commitment to even more advanced processes below 10nm in pursuit of semiconductor self-sufficiency.

Recently, Huahong Corporation announced that, to accelerate the research and development as well as mass production of the 40nm featured IC process on the 12-inch wafer production line in Wuxi, Jiangsu Province, jointly established by its wholly-owned subsidiary Huahong Hongli and other joint venture partners, Huahong Hongli signed a “Technology Development Agreement” with HLMC on December 1, 2023.

The agreement stipulates that HLMC will provide Huahong Hongli with 40nm logic fundamentals and related process technology, along with corresponding technical services, consultation, and support.

In contrast to Semiconductor Manufacturing International Corp. (SMIC), historically positioned as China’s leading foundry to compete with TSMC, HLMC has maintained a more discreet profile.

Officially capable of manufacturing chips on 22nm- and 28nm-class fabrication technologies, rumors circulated in the market as early as 2020 that HLMC could produce chips on a 14nm FinFET process nodes using deep ultraviolet (DUV).

Moreover, leveraging DUV multi-patterning methods could potentially drive production for advanced processes below 10nm, contributing to China’s pursuit of semiconductor self-sufficiency.

HLMC increased its registered capital from approximately CNY 22 billion to around CNY 28.4 billion, with Big Fund Phase II holding a stake exceeding 10%. This data indicates Big Fund Phase II’s confidence in HLMC’s development, providing substantial financial support to bolster its progress in semiconductor processes.

The investment direction of Big Fund Phase II differs from that of Big Fund Phase I, which primarily focusing on key industries such as chip manufacturing. It is more diversified, spanning multiple areas, including wafer manufacturing, integrated circuit design tools, chip design, packaging testing, equipment, components, materials, and applications.

Read more

• [News] Big Fund II Targets Computing Power, Invests in Tsing Micro Technology
• [News] China’s Big Fund Drive Changxin Xinqiao towards 3-Year Memory Chip Mass Production

(Photo credit: Hua Hong Group)

In recent years, China has been aggressively pursuing the build-out of an independent semiconductor supply chain as it attempts to eschew dependence on foreign suppliers. The key to China’s success is whether it can establish domestic suppliers of semiconductor equipment.

Looking at the current state of China’s semiconductor independence, it should be pointed out that Chinese suppliers of semiconductor equipment have been making the greatest progress on the CMP, etching, and cleaning fronts, while lagging behind in terms of deposition, ion implantation, and photolithography.

CMP equipment is used for polishing silicon wafers and metallic/non-metallic thin films. TrendForce estimates that about 26% of all such equipment procured by Chinese foundries in 2020 was sourced from domestic companies. CMP equipment manufactured by Chinese brands can support process technologies as advanced as the 14nm node, which is sufficient for meeting the current demand of Chinese foundries.

An indispensable aspect of silicon or dielectric etch applications, about 24% of all etching equipment procured by Chinese foundries in 2020 was sourced from domestic companies. Chinese-manufactured etching equipment can currently support process technologies as advanced as the 5nm node.

Used for cleaning wafers after the deposition process, CMP process, etching process, and ion implantation process, about 23% of all cleaning equipment procured by Chinese foundries in 2020 was sourced from domestic companies.

Cleaning equipment manufactured by Chinese brands can support process technologies as advanced as the 14nm node. Remarkably, more Chinese companies have been entering this market segment compared to other semiconductor equipment, while some Chinese suppliers are already able to compete with major foreign suppliers in terms of market shares.

Used for PVD, CVD, and ALD processes, about 10% of all deposition equipment procured by Chinese foundries in 2020 was domestically sourced. Chinese-manufactured deposition equipment can support process technologies as advanced as the 14nm node. However, as the technological barrier for manufacturing these products is relatively high, Chinese suppliers are still in the process of catching up to their global competitors in terms of technology. Hence, it remains difficult for Chinese suppliers to continue raising their market shares in the short run.

Likewise, as the technological barrier for manufacturing ion implantation and photolithography equipment is relatively high, equipment from Chinese suppliers is unlikely to support advanced process technologies in the short run despite these suppliers’ aggressive R&D efforts. In terms of self-sufficiency, about 5% and 1% of all ion implantation equipment and photolithography equipment, respectively, procured by Chinese foundries in 2020 was domestically manufactured.

（Cover image source: Unsplash）