China's second-largest chip foundry, Hua Hong Semiconductor Group, has signed a $6.7 billion deal for a wafer fabrication plant in Wuxi, Eastern China.

The state-backed semiconductor investment fund and a Wuxi-based entity also participated in the deal, marking the biggest such investment in China's chip industry since the US imposed stricter sanctions in October.

Hua Hong and its subsidiary will invest $880.38 million and $1.169 billion in cash respectively, giving them a combined 51% stake in the new foundry. The Big Fund and the Wuxi entity will invest $1.165 billion and $804 billion in cash respectively.

The new wafer fab will be Hua Hong's second 12-inch facility in Wuxi and will produce chips using mature technology nodes such as 65-nanometre, 55-nm and 40-nm.

The new venture will also outlay $25.1 million to acquire land owned by Hua Hong Wuxi, near Hua Hong's first 12-inch fab built in the city in 2017. The focus on mature technology nodes is a sign of China's pivot away from sub-14-nm technologies, which are hardest hit by the new US sanctions.

Hua Hong's new 12-inch fab is more of a planned continuation of its mature node development than a direct response to the latest US sanctions.