(Yicai Global) Jan. 19 -- Hua Hong Semiconductor, the Chinese mainland’s second-biggest wafer foundry, said it will set up a chip joint venture with total investment of USD6.7 billion to meet strong market demand.

Hua Hong and unit Huahong Grace Semiconductor Manufacturing will own 51 percent of the JV, China Integrated Circuit Fund II 29 percent, and a Wuxi municipal entity 20 percent, the Shanghai-based chipmaker said late yesterday. The four investors will provide 60 percent of the funding and financial institutions will lend the rest.

The joint venture project, which will be built in Wuxi, Jiangsu province, will make 12-inch semiconductor wafers using a 65/55 nanometer to 40nm process, Hua Hong said.

Hua Hong unit Hua Hong Wuxi sold the land rights of its 12-inch wafer factory in the city to the JV for CNY170 million (USD25.2 million), the parent firm added, noting that the land will be used to build production lines.

Hua Hong Wuxi’s plant has kept a high operating rate amid robust demand for semiconductors, its parent said, adding that the JV can further expand the 12-inch wafer business to help meet demand.

Shares of Hua Hong [HKG: 1347] rose 0.5 percent to close at HKD31 (USD3.96) in Hong Kong today, after falling almost 2 percent in the morning trading session.

Hua Hong is applying for a secondary listing on Shanghai Stock Exchange’s Nasdaq-style Star Market. It aims to raise CNY18 billion (USD2.7 billion) to fund the JV project, invest in technology research and development, and supplement working capital, according to the prospectus.

Hua Hong is a wafer contract manufacturer that also provides support services for industry, consumer electronics, vehicles, communication devices, and computers, among others.

Editor: Martin Kadiev