China’s No. 2 Chip Foundry HHGrace Says It Has 'Always Been Compliant' With U.S. Export Controls

Why It Matters

HuaHong’s compliance and capacity expansion show Chinese fabs can thrive under export restrictions, preserving supply‑chain options and attracting AI‑driven demand.

Key Takeaways

• HuaHong asserts compliance with U.S. export controls on all equipment.
• New 28nm fab under construction, not subject to export restrictions.
• Utilization rates above 100% through 2025, strong demand projected for 2026.
• AI-driven memory demand expected to sustain growth for next 3‑5 years.
• Company relies on locally trained talent, minimal foreign recruitment.

Summary

HuaHong Semiconductor, China’s second‑largest chip foundry, told reporters it remains fully compliant with U.S. export controls while expanding capacity with a new 28‑nanometer fab that began construction in March.

The company highlighted that its current product portfolio—from 0.35‑micron to 40‑nanometer nodes—lies outside the scope of recent U.S. restrictions, and its internal screening program ensures every customer order meets export rules. Utilization rates have run above 100% through 2025, and the firm expects the new facility to boost output in 2026.

Executives emphasized that AI‑driven memory demand and growth in industrial and automotive sectors will keep the market “extremely strong” for the next three to five years, while acknowledging the cyclical nature of semiconductors. They also noted a talent strategy focused on training Chinese engineers rather than importing foreign staff.

The statements signal that China’s domestic foundry base can continue to grow despite tightening export curbs, offering customers a reliable alternative and preserving a degree of supply‑chain resilience. Investors should watch HuaHong’s capacity rollout as a barometer for how Chinese fabs navigate geopolitical constraints while capitalizing on AI‑related demand.

Original Description

Daniel Wang, CFO of Shanghai Huahong Grace Semiconductor Manufacturing Corporation, says demand from AI, industrials and automotive clients is keeping its fabs running above full capacity, with momentum expected to continue into 2026. He argues the memory boom may last longer because of AI, but warns the semiconductor industry remains fundamentally cyclical.