Hua Hong saw sales grow by 51% in 2022, may increase CAPEX despite downturn

Hua Hong Semiconductors posted an annual growth of 51.8% in sales in 2022, a record high for the second-largest pure-play foundry in China. The company committed to increasing capital expenditure despite a downturn seen in the chip industry.

According to Jiwei, Hua Hong released its annual earnings results for 2022 on March 30, with annual sales growing by 51.8% to US$2,475 million and profit rising by 76% to US$406 million for the period. The chipmaker said its gross profit margin increased by 6.4 percentage points to 34.1% thanks to rising ASPs and an improved product portfolio.

Hua Hong said in a letter to shareholders that despite the cyclical downturn in the semiconductor industry, the company managed to maintain a better-than-overall utilization rate thanks to specific applications such as automotive electronics that saw 100% growth in sales, diversified manufacturing process, customers, and a forward-looking and specialized product strategy.

Hua Hong further said that it has three 200mm (8-inch) wafer fabs and one 300mm (12-inch) wafer fab in place, with a combined production capacity of 2.48 million, 3.26 million, and 3.86 million 200mm-wafer equivalents for the past three years, adding that it plans to increase the monthly capacity of its 300mm wafer fab from 650,000 wafers in 2022 to 950,000 wafers in 2023 and may initiate the construction of a new 300mm wafer fab in a timely manner.

According to market intelligence provider Trendforce, Hua Hong ranked the sixth-largest chipmaker after TSMC, Samsung Electronics, GlobalFoundries, SMIC, and Tower Semiconductor, accounting for 2.6% of the IC foundry market of US$33.5 million in the fourth quarter of 2022.

Despite a moderation of the global 300mm fab capacity expansion growth, chipmakers, including Hua Hong, are still increasing their 300mm fab capacity. DIGITIMES reported in January that Hua Hong, the city government of Wuxi, and China's Big Fund would form a joint venture with Hua Hong holding 51% of the stake to produce and sell 300mm wafers based on 65/55nm process nodes.

Financial Times, quoting sources, reported earlier that China was considering providing a handful of its most successful chip companies, including SMIC and Hua Hong, easier access and more control over state-backed research instead of relying on the Big Fund, which is entangled in corruption scandals.

Source: Bloomberg, March 2023