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Chancellor Olaf Scholz’s ambitions to turn Germany into a semiconductor powerhouse have suffered a fresh blow after US tech company Wolfspeed shelved plans to build a factory in the country, prompting the opposition to claim his industrial policy was in tatters.
Wolfspeed was to have built a €3bn factory in the town of Ensdorf, in western Germany, to produce silicon carbide chips widely used in electric vehicles. But the plans have been hit by falling European demand for EVs.
In a statement, Wolfspeed said it was “suspending [its] plans to build our next [fabrication plant] in Ensdorf at this time”, citing a “more modest” increase in EV adoption than previous forecasts.
The move comes just weeks after Intel put off a plan to build a €30bn factory in the east German city of Magdeburg. The project, which was to receive €9.9bn in government grants, would have been the largest foreign investment in Germany’s postwar history.
Scholz had boasted that the Ensdorf and Magdeburg projects showed Germany’s potential to become a major force in the chip industry, as it lavished billions of euros in subsidies to attract the biggest players.
“Yet another government prestige project has been pulped,” said Julia Klöckner, MP for the opposition Christian Democrats. “The subsidy bubble has popped and allows just one conclusion: the Scholz coalition’s economic policy has failed.”
The German government declined to comment, referring all media questions to Wolfspeed and its joint venture partner in Ensdorf, the German auto supplier ZF.
Germany had been seen as pivotal to the EU’s plans to double its share of the global chip market from less than 10 per cent today to 20 per cent by 2030.
Those ambitions were driven by growing concern in Europe about the fragility of global supply chains and the continent’s huge reliance on Asian companies such as Taiwan’s TSMC and South Korea’s Samsung Electronics for chips.
As well as Intel and Wolfspeed, Scholz’s government touted plans by TSMC to invest €10bn in a new factory in the eastern city of Dresden, together with Dutch semiconductor maker NXP and Germany’s Bosch and Infineon. The plant has been promised €5bn in subsidies.
The silicon carbide chips Wolfspeed intended to produce in Ensdorf, in the state of Saarland near the French border, are widely used in EVs, especially in power electronics components such as inverters, converters and on-board chargers.
The project was originally estimated to cost about €2.7bn, and to receive €515mn in state support — €360mn from the federal government and €155mn from the Saarland government. ZF was supposed to contribute €170mn.
But Wolfspeed believed it now had the “capacity we need for the foreseeable future to support our customers’ expected ramp timelines”, citing improved productivity and facilities it is already building in Mohawk Valley, New York state, and at its headquarters in Durham, North Carolina.
It added that while the medium- to long-term outlook for silicon carbide semiconductors remained strong globally, “our market research and recent announcements by EV automakers over the past few quarters indicate a more modest [increase in] EV adoption than previously projected”.
Experts said Wolfspeed had been facing growing competition from bigger rivals with more financial firepower: according to TrendForce, it is now fourth in the rankings of silicon carbide power devices manufacturers, behind STMicroelectronics, ON Semiconductor and Infineon. It has also experienced technical problems at some of its US facilities.
Anke Rehlinger, Saarland’s prime minister, said on Wednesday that the Wolfspeed project was “not being abandoned, but is being pushed back to an undetermined point in the future, mainly due to market developments”.
Wolfspeed said Ensdorf remained its “preferred site” for a potential expansion in Europe.
In a statement, ZF denied earlier reports that it was the reason the factory had been postponed. “Wolfspeed is responsible for the project,” it said, adding that ZF had always provided “intensive and active support” for the scheme.
Economists said the decisions by Intel and Wolfspeed showed Berlin’s policy of using billions of euros in state support to lure investments by global tech giants had failed.
“Such subsidies . . . don’t address the real obstacles to investment in Germany,” said Oliver Holtemöller of the Leibniz Institute for Economic Research, Halle. He said Scholz’s government should focus instead on “economic policies that improved the business environment for all companies, including those that have not even been founded yet”.