Wolfspeed to announce new EV chip plant in Germany

German chip supplier ZF Friedrichshafen and U.S. chipmaker Wolfspeed will announce plans on Wednesday to build an electric vehicle chip plant in the Saarland region, according to three sources close to the matter.

Chancellor Olaf Scholz and Economy Minister Robert Habeck will attend the event, a sign that the government expects to get approval from Brussels to subsidise the plant and start construction, a source close to the matter told Reuters.

The move comes as governments in Europe jockey for new industrial projects amid unease that subsidies on offer in the United States via the Inflation Reduction Act (IRA) will lure planned investments in Europe across the Atlantic.

"Amid the concerns that the U.S. wants to divert investments from Europe with its Inflation Reduction Act, we're showing that a U.S. firm wants to invest in Germany," a German government source said.

Frankfurt-listed Wolfspeed shares were 6.5% higher in morning trading.

European Commission President Ursula von der Leyen will present plans on Wednesday, seen partly as a response to the Inflation Reduction Act, which will aim to ensure the bloc plays a leading role in clean tech production and reduces its dependence on China.

The measures are expected to include a loosening of EU state aid rules, repurposing of existing EU funds and faster approval for green projects in the bloc.

Already, Europe has passed a 45-billion-euro plan to boost its market share in semiconductors to 20% by 2030 from 8% now, though it still needs to be debated in the European Parliament before it can become law.

Volkswagen, Europe's top carmaker, earlier this month warned that the chip squeeze meant 2023 would remain volatile and challenging, but expected supplies to improve.

Wolfspeed specialises in silicon carbide chips, which have been gaining traction with electric car makers as they can handle high voltages and are more power efficient.

The company announced in September a new plant in the United States due for completion in 2030, which it said will be the world's largest silicon carbide materials facility.

Its project in Germany will cost over 2 billion euros ($2.2 billion) and ZF will hold a minority stake, with production to begin in four years, according to German business paper Handelsblatt which previously reported on the plans, citing unidentified sources.

A spokesperson for ZF declined to comment. Wolfspeed was not immediately available for comment.


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