US stops exports of tools to China’s number two chip maker — Hua Hong and Huali Microelectronics reportedly on the cusp of starting a 7-nm fab in Shanghai

The U.S. Department of Commerce has reportedly ordered several toolmakers to halt shipments of specific items to Hua Hong, China’s second-largest chipmaker. According to Reuters, the company, through its contract chipmaking subsidiary Huali Microelectronics, is starting to build a 7-nm production line at its Shanghai facility, a part of Beijing’s push to increase leading-edge chip output by five times in the next couple of years.

Washington has been aggressively using export controls to stymie Beijing’s efforts to become self-sufficient in its semiconductor industry. As part of this, both TSMC and ASML have since been banned from providing or selling their most advanced services and equipment to many Chinese tech companies. This has forced China to build its own chips at home and even rely on domestic chip-making tools. Because of this, many local chipmaking tool makers, like Naura, AMEC, AMC Research, and Piotech, saw record revenues in 2025.

Some of the affected American manufacturers include Applied Materials, KLA, and Lam Research, which have no choice but to comply with Washington’s demands.

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Although the U.S. already has an existing policy that prevents the shipment of advanced tools to China, this recent move risks adding tension ahead of President Donald Trump’s meeting with Chinese President Xi Jinping in May this year. In response to the recent ban, Chinese Foreign Ministry spokesperson Lin Jian said China is hoping that the U.S. would stabilize the global industrial and supply chains and keep trade functioning smoothly.

The Chinese companies will not receive the equipment they need to move forward with more advanced manufacturing processes from the U.S. companies, slowing down their progress. However, there’s also the possibility that they could source them from other non-American suppliers or find a workaround to the current export controls. On the other hand, the order to stop shipments also negatively impacts the U.S. firms, with some estimating that the three toolmakers could potentially lose out on billions of dollars in sales.

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