US chipmaker to build semiconductor plant in Germany

A US chipmaker has announced plans to build a €3bn factory in west Germany in a move hailed by senior German officials as a sign that Europe can compete against powerful US green subsidies. 

The factory, on the site of a decommissioned coal plant in the west German region of Saarland, will be built by the US semiconductor producer Wolfspeed and will produce silicon carbide chips for electric vehicles and industrial use.

Speaking at the site of the planned production facility, which is still subject to EU approval, German chancellor Olaf Scholz said that the move proved that companies looking to make sustainable investments should not “look any further” than Europe.

Anke Rehlinger, minister president of Saarland, said US president Joe Biden’s Inflation Reduction Act — a huge programme of subsidies announced last year that has triggered fears in Europe about losing out on green investment — served as “strong competition” for Germany and other EU states. But she added: “We can say today, we can win this competition.”

The Saarland announcement is relatively small compared with other recent investments in semiconductors, such as the decision last year by US company Intel to spend €17bn on a giant new chip manufacturing plant in the German city of Magdeburg.

But it comes at a time when the EU is seeking to encourage a huge increase in European manufacturing of the chips, which are used in computers, smartphones, vehicles and a range of other products and devices, in order to reduce the vulnerability of its supply chains and limit its dependence on Asia and the US. 

Wolfspeed hoped that 20 to 25 per cent of the total cost of the investment would come from subsidies, said the company’s chief executive Gregg Lowe.

The German auto producer ZF Friedrichshafen is expected to contribute about 10 per cent of the construction costs, according to a person familiar with the matter. The car parts maker also announced plans to create a research and development facility in Germany.

The announcement offers a boost to Saarland, an area whose economic future has been thrown into peril by the move away from conventional vehicles. The area is deeply dependent on the auto industry, which employs about 44,000 people in a region with a population of 1mn, but has been hit by closures. Ford announced last month that it was considering selling its plant in the west German state. 

Holger Klein, chief of ZF, said that the new factory — which is expected to employ about 600 people when fully operational — offered a chance to stabilise supply chains and accelerate change towards new forms of transport at what he called a time of “drastic and dramatic challenges” for the industry.

Wolfspeed, which is headquartered in North Carolina, specialises in the production of silicon carbide semiconductors that aim to help electric vehicles recharge faster and reduce the size of their batteries. They are also used in the production of wind and solar power.