Huahong Hongli (688347.SS, 1347.HK), China’s second-largest wafer foundry and formerly known as Huahong Semiconductor, said in a Sept. 12 filing with the Shanghai Stock Exchange that it had completed a share-based acquisition of a 97.4988% stake in Shanghai Huali Microelectronics.
According to the summary of its listing announcement for newly issued shares, the company issued 190,768,392 A-shares to four sellers at RMB 43.34 per share, paying total consideration of RMB 8.268 billion. The new shares were registered on Sept. 9 with China Securities Depository and Clearing Corporation’s Shanghai branch, lifting the total number of A-shares to 598,518,392.
The equity interest in Huali Micro completed its industrial and commercial registration change on Sept. 3, making the chipmaker a wholly owned subsidiary of Huahong Hongli.
Huali Micro’s production line and revenue scale
Huahong Hongli’s restructuring report submitted in June said Huali Micro owns mainland China’s first fully automated 12-inch integrated circuit foundry production line. Its process technologies cover 65/55 nm and 40 nm, and its designed monthly capacity is 38,000 wafers.
The report said Huali Micro developed its own 55/40 nm logic process platform based on IMEC’s 65 nm process and introduced mass production of SONOS embedded Flash technology. Its products are used in baseband processors, image sensors, small- and medium-size panel driver chips, and power management chips.
Using audited 2025 figures cited in the report, Huali Micro posted revenue of RMB 5.101 billion, equivalent to 29.50% of Huahong Hongli’s RMB 17.291 billion revenue for the same year.
Valuation and pricing
For valuation, Dongzhou Appraisal used Aug. 31, 2025 as the benchmark date and applied the market approach to value all shareholder equity in Huali Micro at RMB 8.48 billion. That represented an increase of RMB 6.478 billion from the book value of parent-company equity attributable to shareholders of RMB 2.002 billion, or a value-added rate of 323.59%. The transaction price for the 97.4988% stake, RMB 8.268 billion, was negotiated on that basis.
The issue price of RMB 43.34 was not lower than 80% of the average trading price over the 120 trading days before the pricing benchmark date, the filing said.
Transaction tied to a prior listing commitment
The restructuring report said the purpose of the transaction was to fulfill a commitment made by the controlling shareholder. When Huahong Hongli listed on the STAR Market in 2023, its indirect controlling shareholder, Huahong Group, publicly pledged that within three years of the listing date, and after approval from competent authorities under national strategic arrangements, it would inject Huali Micro into the listed company.
Both Huahong Hongli and Huali Micro operate 65/55 nm and 40 nm foundry processes. The report said the horizontal competition between the two is therefore resolved within the commitment period. The listed company expects its total capacity and market position to improve after adding 38,000 wafers of monthly capacity.
Timeline of the deal
The company and the sellers signed the asset purchase agreement on Aug. 29, 2025 and a supplemental agreement on Dec. 31. It received an implementation opinion letter from the Shanghai Stock Exchange review center on June 11, 2026, then obtained registration approval from the China Securities Regulatory Commission on July 8. The target asset was delivered on Sept. 3, and the new shares were registered on Sept. 9.
A Sept. 11 report by Chain News on TrendForce’s second-quarter wafer foundry ranking said Huahong Group ranked sixth with revenue of more than $1.27 billion.
All four sellers took shares as consideration
All four sellers received shares rather than cash. Huahong Group sold a 63.5443% stake and received 124,332,053 shares. Shanghai Integrated Circuit Industry Investment Fund sold 15.7215% and received 30,761,109 shares. National Integrated Circuit Industry Investment Fund Phase II sold 10.2503% and received 20,056,014 shares. Shanghai Guotou Xiandao Integrated Circuit Private Equity Investment Fund sold 7.9827% and received 15,619,216 shares.
According to the indicative announcement on changes in shareholder equity, and excluding the supporting fundraising, Huahong Group and Huahong International, its wholly owned directly controlling shareholder, will see their combined stake rise from 20.07% to 24.53%. Huahong International’s own stake will be diluted from 20.00% to 18.02%.
The shares obtained by the Shanghai integrated circuit fund account for 5.14% of domestically issued stock. The ultimate controller remains the Shanghai State-owned Assets Supervision and Administration Commission, and the transaction does not trigger a mandatory tender offer.
Lock-up periods and compensation terms
Lock-up periods differ by seller. Shares obtained by Huahong Group and Guotou Xiandao Fund may not be transferred for 36 months. If, within six months after the transaction closes, the share price stays below the issue price for 20 consecutive trading days, or if the closing price at the end of the six-month period is below the issue price, Huahong Group’s lock-up will automatically be extended by another six months.
The Shanghai integrated circuit fund faces a six-month lock-up. Of the 20,056,014 shares obtained by National IC Fund Phase II, 10,163,843 are locked for 12 months and 9,892,171 for 36 months.
The transaction also includes an impairment test compensation mechanism covering the year the deal is completed and the following two fiscal years. If the appraised value of the target assets falls below the total transaction consideration, the compensating party will first use the shares it received for compensation, and the listed company will repurchase and cancel those shares for a total price of RMB 1.
Supporting fundraising of up to RMB 7.556 billion remains pending
The second part of the transaction is a supporting share sale to no more than 35 specific investors, with proceeds capped at RMB 7.556 billion. The shares will be sold through a book-building process, with the issue price set at no lower than 80% of the average trading price in the 20 trading days before the first day of the issuance period. Subscribers will be subject to a six-month lock-up.
The proceeds are earmarked for RMB 3.295 billion for Huali Micro’s technology upgrade project, or 43.60% of the total; RMB 562 million for its specialty process R&D and industrialization project, or 7.43%; and RMB 3.7 billion for working capital replenishment, debt repayment and intermediary fees, or 48.97%.
The announcement summary said the next steps include completing the supporting fundraising within the time limit set in the CSRC approval and handling registration and listing procedures for the newly issued shares. If the fundraising cannot be completed or falls short, the company will cover the gap with its own funds.
Executive departure disclosed
The summary also said that from July 8, when registration approval was obtained, to the date the announcement summary was issued, senior executive Zhou Weiping left the listed company for work reasons. The company said the departure would not cause a material adverse impact on production or operations, and there were no changes to Huali Micro’s directors or senior executives.