Major Chinese foundry Hua Hong Grace Semiconductor is pouring US$2 billion into a massive capacity expansion in the Chinese chip production hub of Wuxi, racing to meet skyrocketing domestic demand for AI infrastructure and bypass US tech curbs.

The fresh capital would fund the construction of a new 12-inch speciality line, its third facility in the eastern Chinese city, the country’s second-largest contract chipmaker said in a filing to the Hong Kong stock exchange on Tuesday.

Once fully operational, the expansion will add 55,000 wafers to its monthly production capacity, representing a roughly 30 per cent increase to its total capacity in Wuxi.

Hua Hong and its Shanghai subsidiary are providing US$1 billion and US$1.1 billion respectively, holding a controlling 51 per cent stake, while the state entities will provide the remaining capital.

The state capital injection will bring total funding for the project to US$4.2 billion, according to the filing.