German automotive supplier ZF has withdrawn from a planned $3 billion microchip manufacturing project in western Germany, originally slated for production with U.S. chipmaker Wolfspeed.
Impact German Strategy
The decision reflects ZF’s need to implement billions in cost-saving measures as demand for semiconductors falls short of projections, casting uncertainty on the future of the project.
ZF initially committed $185 million to the factory, which aimed to produce specialized chips for electric vehicles.
Announced in February 2023, the project included both a manufacturing plant and a research and development center in Saarland, Germany, according to Boosted.
If abandoned, the setback would impact Germany’s strategy to attract international tech investments and establish itself as a competitive business hub.
Industry sources report that Wolfspeed decided to pause the project, questioning its expected market entry value amid a sluggish European demand for microchips. ZF, addressing recent media reports, clarified that the delay originated with Wolfspeed, stating:
“Wolfspeed has overall responsibility for the project. ZF has always provided intensive support.” Neither Wolfspeed nor Germany’s Ministry of Economic Affairs commented further.
Needs $6.2 billion USD
Economic challenges have placed significant financial strain on ZF. To address cost pressures, the company announced plans to reduce its German workforce by 25% by 2028 and has lowered its earnings forecast.
ZF must secure savings totaling nearly $6.2 billion USD as it adjusts to slower-than-expected demand for electric vehicles and related components.
Wolfspeed previously delayed the project in 2022 due to financing issues, and now anticipates construction might begin in mid-2025 at the earliest.
For now, Wolfspeed has redirected its focus on expanding its New York factory, seeking to manage costs as the European and American markets for electric vehicles face sustained economic headwinds.
ZF and Wolfspeed’s struggle isn’t isolated; other semiconductor manufacturers, including Intel, have similarly delayed European factory plans, underscoring widespread challenges across the semiconductor industry.
