Wolfspeed abandons plans to build chip facility in Germany – report

Wolfspeed (NYSE:WOLF) has abandoned its plans to set up a semiconductor factory in Ensdorf, Germany amid slower demand for electric vehicles, The Financial Times reported.

The move is the latest blow to Chancellor Olaf Scholz’s ambitions to turn Germany into a semiconductor powerhouse, the report added.

The Durham, N.C.-based company had said in June that it delayed the plans to build the $3B chip facility which would develop computer chips used in electric cars.

The move by Wolfspeed — which focuses on silicon carbide, or SiC, and gallium nitride, or GaN, technologies — highlights EU’s struggle to increase semiconductor production and reduce its dependence on Asian chips.

Wolfspeed had announced its plans for the 200mm semiconductor fab in Saarland, Germany in February last year. However, the company, having reduced capital spending after weakness in the EU and U.S. EV markets, is now focused on ramping up manufacturing in New York, according to a prior report.

German automotive supplier ZF had planned to withdraw from the microchip manufacturing project with Wolfspeed, Reuters had reported, citing an industry source. ZF denied reports that it was the reason the factory had been postponed, as per report from FT.

The move to shelve the project comes on the heels of Intel (INTC) delaying plans to build a €30B factory in Magdeburg, Germany. The project, which was to receive €9.9B in government aid.

Germany had led the way in backing plans by Intel, Taiwan Semiconductor Manufacturing (TSM), Infineon and Wolfspeed. However, these plans have not received approval in the EU.

Meanwhile, companies including TSM, STMicroelectronics (STM) (OTCPK:STMEF), Infineon and GlobalFoundries (GFS), have already announced plans for new European plants amid the European Chips Act, which came into force in September 2023. The EU’s €43B Chips Act is aimed at supporting local chip manufacturing.

The U.S., China, Japan and South Korea are among countries which have stepped up efforts to boost domestic chip production to stay ahead in the AI race. Under the U.S. CHIPS Act, several companies have inked preliminary deals with the U.S. Department of Commerce to get funds.