A project to build a €3bn factory making microchips for electric vehicles once hailed as part of a “return of the industrial revolution” in Germany has been put on hold, as the crisis in the country’s hi-tech manufacturing industry deepened.
US company Wolfspeed and German car parts supplier ZF have postponed plans to build an EV chip factory, adding to problems caused by a delay to two large-scale factories by US chip giant Intel and potential factory closures being considered by German carmaker Volkswagen.
Wolfspeed and ZF have put the project in Ensdorf in the western state of Saarland on hold due to disappointing consumer demand and doubts about its viability in the European market.
A ZF spokesperson said it had been the US company that had taken the decision not to move ahead with construction, which was originally slated to begin in summer 2023 and eventually employ up to 1,000 people.
“After Wolfspeed delayed the factory project in Ensdorf indefinitely, the planned Wolfspeed-ZF cooperation on the factory is now on ice,” the spokesperson said in an emailed statement.
The suspension of the project compounds the bleak national economic outlook signalled by the International Monetary Fund on Tuesday. The organisation said German economic growth would flatline this year and climb just 0.8% in 2025, making it the worst performer among highly industralised countries.
A slowdown in demand for electric vehicles has sent a chill through the European manufacturing sector, causing a further headache for carmakers including Wolfsburg-based Volkswagen struggling to adapt to the transition away from fossil fuels.
Last month, Intel said it would delay work on two flagship factories in the eastern German city of Magdeburg, planned at a cost of €30bn, for which it agreed €10bn in subsidies with the German government.
The company cited a cost-cutting drive due to global complications in boosting semiconductor production for the freeze in plans intended to make Europe less dependent on Asia in the sector.
In February 2023, Wolfspeed and ZF said in the presence of Germany’s chancellor, Olaf Scholz, and the economy minister, Robert Habeck, they would build the “world’s largest, most advanced” silicon carbide components factory at a cost of €2.75bn. Federal and state subsidies were slated to amount to €515m.
At the time, Scholz hailed the project as part of a “return of the industrial revolution” to Germany.
The newspaper Frankfurter Allgemeine reported that, beyond slack demand, Wolfspeed had been hit by technical difficulties at its US plants and seen a dramatic slump in its share price in the last two years. It will report financial results in early November, at which point it is expected to officially announce the Ensdorf decision.
ZF, whose electromobility division has reported severe problems, plans to cut a quarter of its 54,000-strong workforce Germany by 2028 in the face of slow demand for EVs. It had planned to contribute about €170m to the Wolfspeed joint venture.
The suspension of the plant project is also a severe setback for tiny Saarland on the French border which had undergone a successful transformation over several decades away from coal mining and through the steel crisis, helped by the automotive industry. The Ensdorf research and development centre had been scheduled to be built on the site of a former coal-fired power plant.
US manufacturer Ford recently announced plans to stop production in the state.
Scholz, a Social Democrat whose three-way coalition has been hobbled by infighting and sinking popularity, has been attempting to jumpstart the flagging German economy in cooperation with industry.
Spiegel magazine on Wednesday ran the drastic headline “Is mass unemployment coming back?”, citing fears of a catastrophic slump last seen in the early years of millennium as companies including BASF, Thyssenkrupp and Miele cut high-paid positions.
With the jobless rate set to reach 5.9% this year, Scholz has faced calls for ambitious reforms including eliminating bureaucratic hurdles, reforming the tax system and promoting measures to address Germany’s looming demographic crunch.
Wolfspeed did not respond to a request for comment.
