By Toby Sterling, Christoph Steitz and Hakan Ersen
AMSTERDAM/FRANKFURT (Reuters) - Wolfspeed (NYSE:WOLF) has delayed plans to build a $3 billion plant in Germany, highlighting the European Union's struggle to increase semiconductor production and reduce its reliance on Asian chips.
The planned plant in the state of Saarland, which would make computer chips used in electric cars, has not been scrapped entirely and the company is still seeking funding, a spokesperson said.
But, having cut capital spending following weakness in the European and U.S. EV markets, North Carolina-based Wolfspeed is now focused on ramping up production in New York, the spokesperson added. The company won't start construction in Germany until mid-2025 at the earliest, two years later than its original target.
Wolfspeed has been under pressure from an activist investor to improve shareholder value after its stocks fell around 51% over the past year.
Companies including Intel (NASDAQ:INTC), TSMC, Infineon (OTC:IFNNY), STMicroelectronics and GlobalFoundries (NASDAQ:GFS) announced plans for new European plants after the EU launched its Chips Act in 2022.
Competing with similar plans in the U.S., China, and Japan, the legislation aimed to raise 43 billion euros ($47 billion) through public and private investments to strengthen the region's semiconductor industry.
It was drafted after the COVID-19 pandemic resulted in a global shortage of semiconductors and was designed to facilitate the production of cutting-edge chips in Europe.
But, two years on, few projects are actually being built and even fewer have received European Commission approval for state aid, without which they are not financially viable.
The delays are slowing the region's efforts to make itself more self-sufficient and protect itself against escalating trade tensions.
The EU's target of winning 20% of global market share by 2030 is out of reach, according to Jan-Peter Kleinhans, a chip expert at German tech and politics think tank interface, formerly known as Stiftung Neue Verantwortung.
Self-sufficiency is unrealistic given the interconnected nature of chip markets, and Europe remains vulnerable to shocks, he added.
Still "you have to be impressed by the sheer amount of project announcements that have been made," Klienhans said. "Even if several of them will never see the light of day."
Under the EU Chips Act, public money is provided by state and national governments while the vetting of projects takes place in Brussels.
Germany, Europe's biggest economy, had led the way in backing plans by Intel, TSMC, Infineon and Wolfspeed. But none have so far won EU approval.
Germany has since entered a budget crisis, weakening its commitment to major infrastructure projects, though officials say semiconductor plant funding is not in doubt.
Meanwhile, gains made by populist parties in European elections may weaken support for renewable energy projects that are a key source of business for chipmakers, or lead to anti-immigration policies that make hiring staff more difficult.
INTEL TIMING SLIPS
Intel's planned plant in the east German city of Magdeburg is expected to be the biggest in Europe, costing $33 billion, including $11 billion in state aid.
The company was supposed to start preparatory work on the project this year but that has been pushed back.
An immediate problem is a layer of rich topsoil at the site, equivalent to 80,000 truckloads of earth. Under German law, the soil must be preserved and redistributed to farmers before construction can begin.
That means completion of the project, which would be Europe's only plant producing cutting edge logic chips, is slipping toward the end of the decade.
"The first facility (at Magdeburg) is expected to enter production within four to five years following the European Commission's approval," an Intel spokesperson said.
Some projects are progressing.
TSMC plans to start work this year on an $11 billion plant in Dresden, together with car chip makers Robert Bosch, NXP (NASDAQ:NXPI) and Infineon, a spokesperson said.
French-Italian firm STMicroelectronics, a Wolfspeed competitor, last month won EU approval for a 5 billion-euro silicon carbide plant being built in Italy.
Onsemi, another Wolfspeed competitor, on Wednesday announced plans to spend up to $2 billion to expand its silicon carbide operations in Czech Republic, pending EU approval.
EU antitrust chief Margrethe Vestager said in May she was "absolutely sure" approvals in other countries are imminent.
In 2023, ST also won EU approval to build a 7.5 billion-euro plant in Crolles, France, together with GlobalFoundries.
Construction on that project is underway, an ST spokesperson said. However, GF is not yet participating, French business magazine L'Usine reported in March.
"The rate and pace of our expansion in Crolles will be in alignment with customer demand and market conditions," a GF spokesperson said.
Germany's Infineon, which began building a 5 billion-euro power chip plant in Dresden in 2023 at its own risk, is on track for 2026 completion, despite not yet having EU aid approval.
"Now it is up to the European Commission" a spokesperson said.
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