In this work we have studied hydrogen etching of Silicon Carbide (SiC) chips at high temperatures and in confined limited regions, to elucidate and control the formation and propagation of terraces on the surface of SiC (0001) 4° off-axis samples. This process is very important for the development of high-power transistors. The effects of process parameters on the etching of 4H-SiC (0001) have been extensively investigated using several types of surface analysis (Atomic Force Microscopies (AFM), Scanning Electron Microscope (SEM) and High-angle annular dark-field scanning transmission electron microscopy (HAADF-STEM). We correlated the growth of terraces with etching temperature and time. Moreover, we found the average width of terraces increases decreasing the dimension of the structure from 20 µm to 1 µm using the same process parameters. The nanofacet formation of typical hill-and-valley structure has been observed in localized region on SiC (0001) basal plane.