In a surprise announcement by a US chipmaker, a factory worth EUR3bn will be built in West Germany. This move was hailed as a sign of Europe’s ability to compete with powerful US green subsidies.
Wolfspeed, the US semiconductor manufacturer, will build the factory on the site where a former coal plant was located in Saarland, west Germany. It will produce silicon carbide chip for industrial and electric vehicles.
Olaf Scholz, German chancellor, stated that this move showed that companies who want to make long-term investments should not look further than Europe when he spoke at the site where the planned production facility is being built. However, EU approval has yet to be granted.
Anke Rehlinger is the minister president of Saarland. She said that Joe Biden’s Inflation Reduction Act, a massive program of subsidies, was a strong competition for Germany and other EU countries. She added, “We can now say that we can win this contest.”
The Saarland announcement is small in comparison to other recent investments into semiconductors such as the decision lastyear by US company Intel, to spend EUR17bn for a massive new Magdeburg chip manufacturing plant.
It comes at a moment when the EU wants to encourage a large increase in European production of chips. These chips are used in computers and smartphones as well as a variety of other products and devices. This is to decrease its vulnerability to its supply chains and reduce its dependence on Asia and America.
Gregg Lowe, chief executive of Wolfspeed, stated that Wolfspeed expected subsidies to cover 20-25 percent of the total investment cost.
According to an insider, ZF Friedrichshafen, a German auto manufacturer, is expected to contribute around 10% of the construction costs. According to a person familiar with the matter, ZF Friedrichshafen is also planning to establish a research-and-development facility in Germany.
This announcement will give a boost to Saarland. The area’s economic future is in peril due to the abandonment of conventional vehicles. This area, home to approximately 44,000 people and a population of 1mn is heavily dependent on the automobile industry. However, it has also been affected by closings. Ford last month announced that it was looking at selling the plant in West Germany.
Holger Klein, chief executive of ZF, stated that the new factory, which will employ around 600 people when fully operational, offered the chance to stabilize supply chains and accelerate the transition towards new forms transport in a time of “drastic, dramatic challenges” for his industry.
Wolfspeed is located in North Carolina and specializes in silicon carbide semiconductors. These semiconductors are designed to make electric cars recharge more quickly and smaller. They are also used to produce wind and solar energy.