The grand integration drama of mature semiconductor processes: Hua Hong and SMIC both take action.

Recently, the semiconductor industry has been quite lively, with two major domestic mature process foundry giants engaging in internal integration. To be honest, these moves seem like a capital game, but fundamentally they are a prelude to industry reshuffling.

Huahong has just announced that it will acquire nearly 98% of Huali Micro from its parent company through a combination of issuing shares and cash, along with supporting financing. On the surface, this is to resolve the industry competition issue promised during the A-share listing, but in reality... as soon as the A-shares resumed trading, they surged by 9.18%, indicating that the market is clearly in favor of this approach.

Following that, SMIC also refused to back down, announcing its intention to issue A-shares to acquire a 49% stake in its own subsidiary, SMIC North. The counterparties are all national teams and industrial funds. A-shares were directly suspended, but H-shares were excited, soaring nearly 5% that day.

I have to say, the subsidiary North Microelectronics is quite remarkable. Although SMIC has not disclosed its financial data separately, from the public information available, it and SMIC Beijing together account for 26.56% of SMIC's total assets and 27.41% of its revenue. More importantly, that 12-inch production line at North Microelectronics has been running for nearly 10 years, and the equipment depreciation is estimated to be nearly fully accounted for. I bet it's currently making a lot of money.

These two transactions may appear different, but they are essentially the same - both involve the integration of the 12-inch mature process platform. Why is everyone focusing on 12 inches? Because this size has a low unit chip cost, high cost-performance ratio, and is the only size compatible with advanced processes. Global giants including TSMC and Samsung are investing heavily in this direction, and upstream suppliers are also focusing on 12 inches as their main development direction.

The financial report of SMIC at the end of June 2025 shows that the revenue from 12-inch wafers has reached 76%. With such an important business, it is certainly desirable to unify management rights. After acquiring minority shareholders' equity, decision-making efficiency improves, performance can also be consolidated, and there is no need to share profits with others, which is a big win.

To put it bluntly, this wave of operations marks the beginning of the forced "aggregation" within the domestic semiconductor circle. With global competition being so fierce, how can one fight if resources do not concentrate towards the strong? Hua Hong and SMIC are expanding the scale effects of their 12-inch platforms through acquisitions, simply aiming to establish a foothold in the global wafer foundry market.

However, I have some doubts. While this integration optimizes resource allocation and reduces internal friction, we are still far behind in the global semiconductor industry landscape. Others have already advanced in process technology and are way ahead of us, while we are still busy integrating internal resources. The road to catch up is indeed long.

That said, at least this is a step in the right direction. The market's response is so positive; investing money is always better than spreading it thin. I just hope this isn't just superficial capital operation, but a strategic move that can truly enhance technological strength and market competitiveness.