Export Controls USA Stops Delivery of Chip Manufacturing Equipment to Hua Hong

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The USA is tightening its export controls against Hua Hong. According to media reports, manufacturers of chip production equipment have been banned from supplying equipment to China's second-largest foundry. The focus is on equipment associated with 7 nm technology and AI chips

The US government has reportedly restricted deliveries of semiconductor manufacturing equipment to two facilities of the Chinese foundry Hua Hong. The US Department of Commerce is said to have sent letters to this effect to several suppliers, including Lam Research, Applied Materials and KLA. According to the letter, tools and materials destined for Hua Hong sites are affected.

According to the reports, US authorities assume that the affected facilities could be used for the production of particularly advanced chips. Hua Hong is the second largest foundry in China after SMIC. While SMIC is currently the only Chinese contract manufacturer capable of producing chips using 7 nm technology, Hua Hong is said to be working on its own 7 nm process via Huali Microelectronics.

Huali Moves into Focus

Hua Hong acquired a 97.5 percent stake in Huali Microelectronics in February. At that time, Huali offered foundry services in 40 nm and 55/65 nm, among others, and operates Fab 6 in Shanghai with 28 and 22 nm processes. In addition, a facility known as Fab 8a is mentioned, which according to industry sources is still under construction.

Fab 6 in particular is at the center of the reports. Huali has been preparing a 7 nm process there since last year, supported by SiCarrier, a company co-founded by Huawei. The aim is to start production of several thousand 7 nm wafers per month by the end of 2026. One of the source texts also mentions a start by the end of this year, which underlines the uncertainty of the timing.

According to the reports, Huawei is to work together with Hua Hong and examine the possibility of transferring part of SMIC's AI chip production to Hua Hong. A second Chinese supplier with 7nm capabilities would be a strategically relevant step for the USA, as the corresponding processes are considered the basis for high-performance logic and AI components.

Consequences for Suppliers And Supply Chains

The Ministry of Commerce apparently uses so-called "is-informed" letters for such measures. This allows individual companies to be informed of new licensing requirements at short notice without having to wait for a lengthy formal regulatory process. For recipients, this means that certain deliveries may no longer be exported without a license.

The restrictions could have considerable economic consequences for US equipment suppliers. Lam Research, Applied Materials and KLA are among the most important suppliers of etching, coating, measuring and process control systems. As all three companies generate a significant proportion of their business in China, the loss of deliveries to fabs under construction or newly equipped could affect sales worth billions.

The USA apparently intends to slow down China's expansion of its own semiconductor capacities. However, whether they permanently delay the development at Hua Hong depends on whether the affected systems can be replaced by equipment from other foreign suppliers or by Chinese alternatives. Politically, the steps fit into a broader US strategy to further restrict China's access to manufacturing technologies for advanced logic and AI chips.(sg)

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