US chip manufacturer Wolfspeed said on Wednesday it is looking to build the world's largest factory for silicon carbide semiconductors in the south-western state of Saarland.
With these chips, Wolfspeed is ushering in "a new era in the automotive industry - the transition from the combustion engine to the electric vehicle," chief executive Gregg Lowe said during a visit to the planned factory site by German Chancellor Olaf Scholz and Economy Minister Robert Habeck on Wednesday.
At a sum of around €2.7 billion ($2.94 billion), Wolfspeed plans to build the factory in Ensdorf on the site of a decommissioned coal-fired power plant.
Semiconductors made of silicon carbide are considered a key technology for the further development of electric vehicles and autonomous driving. The material is in demand because the different type of silicon enables electric cars to be charged faster, drive more economically and thus increase their range.
Wolfspeed wants to start building the factory as soon as they get the green light from the European Commission. "We expect it in the next few months," said Lowe. He said he expects a government subsidy of 20 to 25% of the total investment
When fully operational, the factory will have more than 600 employees on board, he said. "And create many more jobs," Lowe said. The market is huge, he said, and demand for the semiconductors is very high.
"It is no exaggeration to say: with the construction of this factory, the industrial revolution is returning to Ensdorf," said Scholz. "There is much to say that the future belongs to semiconductors made of silicon carbide in the field of new renewable energies, telecommunications and especially in electromobility."
Habeck said the investment showed that the production of "clean" industry remained possible in Germany.
The new chip factory will also make a significant contribution to ensuring that European industry is reliably supplied with semiconductors, said the chancellor.
The key German automotive industry has been struggling since the pandemic with bottlenecks in the delivery of semiconductors, which mainly come from Asia and the US, forcing the leading names in the industry to partially shut down production at times.
Germany is keen to move chip production closer to the car manufacturers.
This is also consistent with the EU's current discussion about securing domestic supply chains to compete with the US.
Scholz said that the controversial US subsidy programme, the landmark Inflation Reduction Act (IRA), should be an incentive to ramp up investment opportunities within Europe.
"This includes making European state aid law even more agile and also, in the short term, more flexible, so that investors know early on what support they can count on," Scholz said.
The German leaders' comments came on the same day as European Commission President Ursula von der Leyen's announced plans to develop a support fund as well as allow greater state-aid subsidies.
This is aimed at helping the European clean energy technology industry compete with the United States and China.
Scholz praised these proposals, saying they were a step in the right direction.
The EU has scrambled to respond to the IRA, a €346 billion ($367 billion) package passed by the US, part of which incentivizes the domestic manufacturing of clean energy. The bloc fears the legislation could cause EU-based companies to move overseas.
The IRA ensures tax credits for US consumers who purchase electric vehicles with batteries manufactured domestically and in certain countries with free trade agreements with the United States. The EU and US are major trading partners, but have no such deal.
Addressing this recent friction over the IRA, Scholz said that the bill was first and foremost an important step for US progress on climate policy, which Europe welcomed.
"And at the same time, of course, we are talking to our American friends to make sure that European companies are not disadvantaged by this," he added. "Because it is not tariff barriers or strict rules of origin that ensure innovation, but open markets and fair competition."
Wolfspeed was founded in 1987 under the name Cree in Durham in the US state of North Carolina. In the fiscal year of 2022, the company reported sales of $746 million. By 2027, sales are expected to rise to $4 billion.
The Handelsblatt business newspaper also reported that the automotive supplier ZF has a minority share in the microelectronics factory.
