China’s Leading Chipmakers Move Toward Consolidation as Self Sufficiency Drive Accelerates

China’s leading contract chipmakers are accelerating a new wave of consolidation as Beijing pushes harder for technological self sufficiency in the face of ongoing strategic pressure from the United States.

This week, Hua Hong Semiconductor, the country’s second largest contract chip manufacturer, announced plans to acquire its sister foundry based in Shanghai. The move came just days after market leader Semiconductor Manufacturing International Corp revealed it would take full ownership of one of its key subsidiaries. Together, the transactions underline a clear shift toward tighter integration within China’s semiconductor industry.

Hua Hong said it will purchase a 97.5 percent equity stake in Shanghai Huali Microelectronics from its state owned parent, Hua Hong Group, along with several major domestic investment funds. These include the Shanghai Integrated Circuit Industry Fund, the Shanghai Guotou Pioneer Fund, and the second phase of the China Integrated Circuit Industry Investment Fund, widely known as the Big Fund.

The acquisition is valued at 8.27 billion yuan, or about 1.2 billion US dollars. In comparison, SMIC’s move to consolidate its subsidiary carries a price tag of 40.6 billion yuan. Industry observers see these large scale deals as a signal that China’s chipmakers are being encouraged to streamline operations, reduce internal competition, and build stronger national champions.

China’s semiconductor sector has faced growing challenges as export controls and technology restrictions imposed by Washington limit access to advanced manufacturing equipment and critical chipmaking know how. In response, Beijing has doubled down on its goal of reducing reliance on foreign suppliers by strengthening domestic production capacity across mature and advanced process nodes.

By bringing related assets under unified ownership, companies like Hua Hong and SMIC can coordinate investment decisions more efficiently, share research and development resources, and improve production yields. This consolidation is also expected to help stabilize pricing and improve resilience across the supply chain at a time when global demand for chips remains volatile.

While the transactions do not immediately change China’s position in the most advanced semiconductor technologies, they reflect a longer term strategy focused on scale, stability, and incremental capability building. As geopolitical tensions continue to shape the global technology landscape, further consolidation among Chinese chipmakers is widely expected.