Recently, two established wafer foundries in China—Huahong Semiconductor and Semiconductor Manufacturing International Corporation (SMIC)—announced significant acquisition events.

Huahong Semiconductor acquired 97.4988% of Huali Micro, controlled by its major shareholder, through issuing shares and paying cash. This transaction was also accompanied by fundraising to address the industry competition commitments made when it was listed on the Growth Enterprise Market (GEM) of the A-share market. After Huahong's A-shares resumed trading on September 1, the stock price increased by 9.18%.

Meanwhile, SMIC plans to acquire a 49% equity stake in its controlled subsidiary, SMIC North China, through issuing A-shares. This deal involves multiple backgrounds, including the National Integrated Circuit Industry Investment Fund. SMIC's A-shares were suspended on September 1, but its H-shares rose by 4.86% on the same day, closing at HKD 63.65.

**Background of SMIC North China**

Currently, SMIC holds a 51% equity in SMIC North China. After the acquisition, it will become a wholly owned subsidiary. Although SMIC has not disclosed the financial data of SMIC North China separately, based on its performance in the first half of 2025, both SMIC North China and SMIC Jingcheng are important non-wholly owned subsidiaries of SMIC. The combined assets of these two companies are approximately CNY 94.083 billion, accounting for about 26.56% of SMIC's total assets; revenue is CNY 8.867 billion, representing 27.41% of total revenue; and net profit is CNY 126 million, making up 3.73% of net profit.

SMIC North China was established in 2013, mainly operating 12-inch mature process lines. Although it initially recorded losses due to equipment depreciation and market development issues, by 2025, this production line has been in operation for nearly 10 years. SMIC management has indicated that demand for 12-inch products remains strong, implying that production capacity has been released, equipment depreciation has been largely completed, and profitability has been achieved.

SMIC Jingcheng was founded in 2020, focusing on 12-inch integrated circuit chip manufacturing and packaging services. It uses 28-nanometer and above process nodes, providing wafer foundry and technical testing services to global clients. In 2025, the company launched a second-phase land planning project with a total investment of no less than CNY 50 billion. Currently, the company is in the ramp-up phase of production, and combined with the second-phase investment, its costs are relatively high.

Overall, SMIC North China may have better profitability. SMIC's acquisition of minority equity in SMIC North China and the full consolidation could enhance its shareholder attributable profit. This is one of the reasons the capital market is optimistic about this trade.

**Significance of Huahong Semiconductor and SMIC's acquisitions**

Huahong Semiconductor's acquisition aims to resolve industry competition issues, while SMIC's goal is to increase control over its mature subsidiaries, facilitating unified decision-making and shortening the business chain. Both are essentially integrating 12-inch mature process platforms to enhance scale effects.

Analysis by Caijing.com suggests that, due to the clear cost-performance advantage of 12-inch wafers, they are the only size compatible with mass production of advanced processes, making them the core investment focus for mainstream foundries. In the upstream supply chain, major equipment giants are also focusing on 12-inch development, providing scaled equipment and materials support for foundries, forming a mature industrial ecosystem.

As of June 2025, SMIC's revenue from 12-inch wafers accounted for 76%, reflecting its strategic focus. After increasing its control over subsidiaries, SMIC is expected to further improve governance efficiency and synergy effects, as well as increase financial returns.

For China's semiconductor industry, Huahong Semiconductor and SMIC's acquisition actions mark important consolidation in the mature process field. Facing global competition, these transactions help strengthen the scale effects of both companies' mature process platforms, enhance their global competitiveness, optimize industrial structure, reduce internal competition, promote resource allocation, and drive development toward higher efficiency and competitiveness.