* Hong Kong-listed chipmaker plans Shanghai raising

* Shares rise as much as 10.7%

* Will use funds to upgrade and expand production

SHANGHAI, May 18 (Reuters) - China's second-largest chip foundry, Hua Hong Semiconductor Ltd, said it had received Shanghai Stock Exchange approval for a planned public share sale worth $2.6 billion, which would be the year's biggest mainland listing so far.

The plan, which still requires a green light from the securities watchdog, comes amid a capital raising rush by Chinese chipmakers as Beijing seeks self-sufficiency in an escalating technology war with Washington.

Hua Hong in November applied for a dual listing on Shanghai's tech-focused STAR Market, aiming to raise 18 billion yuan ($2.60 billion) to upgrade and expand production.

The Shanghai-based chipmaker said late on Wednesday that its application had been approved by the bourse's listing committee, sending its Hong Kong-listed shares up as much as 10.7% on Thursday.

A share sale still requires registration at the China Securities Regulatory Commission (CSRC), it added.

Hua Hong's share listing would be China's biggest this year, dwarfing the $1.67 billion initial public offering (IPO) by another chipmaker, Nexchip Semiconductor Corp, according to Refinitiv data.

The fundraising would "fuel a new round of capacity expansion" by Hua Hong, Guosen Securities said in a report.

Hua Hong, which saw revenue jump 52% in 2022 to a record $2.5 billion, has said it will increase capacity at its 12-inch production line in Wuxi this year and will start to build new lines.

More than a dozen Chinese chipmakers, including Lontium Semiconductor Corp and Skyverse Technology Co , have sold shares publicly on the mainland this year as the government guides capital into a sector crucial in its competition with the United States.

Washington has introduced sweeping export restrictions to limit China's access to advanced chipmaking technology and tools.

This has made it harder for Hua Hong and Chinese champion Semiconductor Manufacturing International Corp to catch up with overseas rivals such as Taiwan Semiconductor Manufacturing Co.

Chinese investors have been ploughing money into chipmaking stocks. An index tracking the domestic sector has jumped 17% since Jan. 1, far outperforming the benchmark CSI300 Index, which gained less than 3%. ($1 = 6.9121 Chinese yuan renminbi) (Reporting by Samuel Shen and Josh Horwitz; Editing by Jamie Freed)