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Construction of Multiple Semiconductor Chip Factories in Germany Encounters Obstacles

Update time : 2024-10-28 09:51:22

According to the latest news, ZF Friedrichshafen AG, a German automotive parts supplier, intends to withdraw from the $3 billion (approximately 21.368 billion yuan) manufacturing project of the world's largest 8-inch SiC chip factory in cooperation with the American chip manufacturer Wolfspeed. The industry speculates that the reason is that Wolfspeed is currently under significant financial pressure, having postponed the construction of the factory on multiple occasions. Most importantly, the subsidies promised by the European Union have been delayed in being disbursed.

Delay of Wolfspeed's World's Largest 8-inch SiC Chip Factory
In January 2023, Wolfspeed and the automotive parts supplier ZF announced the construction of the world's largest and most advanced 8-inch SiC device manufacturing factory in Saarland, Germany. ZF originally planned to invest $185 million to acquire shares in the Saar factory. Initially, it was set that ZF and Wolfspeed would hold a minority stake in the factory, and the project would depend on the subsidy commitment from the EU government, with the subsidy amount being one-fourth of the total investment.

In June this year, Wolfspeed announced the postponement of the factory construction. A spokesperson for the company said that due to the sluggish electric vehicle markets in Europe and the United States, Wolfspeed had cut its capital expenditures and was currently focusing on increasing production at its New York factory. Moreover, the plan for its German factory has not been completely cancelled. The company is still seeking financing and will not start construction in Germany until mid-2025 at the earliest, two years later than the originally scheduled target.

In October this year, Wolfspeed announced on its official website that it had signed a non-binding preliminary memorandum of terms (PMT) with the US Department of Commerce. According to the Chips and Science Act, the US Department of Commerce intends to directly provide Wolfspeed with up to $750 million in financial assistance. This funding will be used to support Wolfspeed in constructing the John Palmour Silicon Carbide Manufacturing Center in Siler City, North Carolina, and expanding the existing silicon carbide device manufacturing factory in Marcy, New York. In addition, a consortium of investment funds led by Apollo, The Baupost Group, Fidelity Management & Research Company, and Capital Group has agreed to provide Wolfspeed with an additional $750 million (approximately 5.3 billion yuan) in new financing. The above funds have to a large extent alleviated the financial crisis currently faced by Wolfspeed.

Delayed Disbursement of Subsidies under the German Chips Act?
Compared with the gradual implementation of subsidies under the US Chips Act, the European Chips Act proposed by the European Union in 2020 has encountered numerous obstacles in terms of fund disbursement. According to Reuters, the subsidies promised by the European Union have attracted companies such as Wolfspeed, Intel, TSMC, Infineon, STMicroelectronics, and GlobalFoundries to successively announce plans to build new factories in Europe. However, several years have passed, and there are very few projects actually under construction.

In addition to the postponement of the factory jointly built by Wolfspeed and ZF in Germany, Intel has also postponed the construction of its factory in Magdeburg. On September 16th, the CEO of Intel announced in a letter to the company's employees that the plan to build a chip factory in Magdeburg, Germany, would be postponed by two years.

More than a year ago, Intel obtained a huge government subsidy commitment of 10 billion euros through negotiations with the German government. Intel originally planned to invest over 30 billion euros to build two cutting-edge chip factories in Germany, which was the largest foreign investment in German history. Earlier, in August, the German government expressed concerns about Intel's construction of an advanced logic foundry wafer factory in Magdeburg and formulated a "Plan B" for the latter in case of an emergency divestment to cope with the risk of failure of the Intel project.

Industry insiders commented that both Wolfspeed and Intel themselves are already under significant financial pressure, and the delay in the disbursement of subsidies by the German government has further exacerbated their operational risks. Moreover, among the investment projects already announced by the above manufacturers for construction, even fewer projects have obtained approval from the European Union. Among them, Infineon started building a 50-euro power chip factory in Dresden at its own risk in 2023, which is expected to be completed in 2026. However, the factory has not yet obtained approval for EU assistance. Additionally, ON Semiconductor plans to invest up to $20 million to expand its silicon carbide business in the Czech Republic, but this investment project is still awaiting approval from the European Union.

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