Wolfspeed Pauses German Semiconductor Plant Construction Plans

According to reports from German media, U.S. chip manufacturer Wolfspeed is pausing its plans to build a semiconductor plant in Germany. The Durham, North Carolina-based company initially intended to collaborate with German automotive parts manufacturer ZF to construct a $3 billion facility in Ensdorf, Saarland, Western Germany. Wolfspeed CEO Gregg Lowe had previously announced that the plant would be built on the site of a former coal-fired power station. The facility was intended to produce chips for electric vehicles, a growing segment of Wolfspeed’s global operations.

However, recent reports indicate that ZF is withdrawing its stake in the $3 billion project. A ZF spokesperson stated that the decision to exit the project came after Wolfspeed informed the company of the construction pause. ZF emphasized that despite offering intensive and active support, Wolfspeed retained control over the project’s direction.

As of Wednesday morning, Wolfspeed had not responded to requests for comments on the future of the Saarland plant. However, Saarland’s Governor, Anke Rehlinger, confirmed the company’s decision. She noted that Wolfspeed had clarified its continued commitment to the Ensdorf facility but decided to delay the investment due to current market conditions, with no new timeline specified.

This development comes two weeks after the Biden administration approved Wolfspeed’s application for a $750 million grant to support the construction of a semiconductor plant in Siler City, North Carolina. The funding is part of the CHIPS Act, federal legislation aimed at encouraging domestic semiconductor production. Despite this support, the semiconductor industry faces significant challenges due to declining global demand for computer chips.

Wolfspeed, the world’s largest manufacturer of silicon carbide substrates, focuses on developing third-generation compound semiconductors. The company’s products primarily revolve around silicon carbide materials, power devices, and RF devices. With the rapid growth of the electric vehicle market in recent years, silicon carbide devices have become increasingly prevalent in electric vehicles, making Wolfspeed a major beneficiary of this trend.

Nevertheless, the recent slowdown in the European and U.S. electric vehicle markets has impacted Wolfspeed’s business. Additionally, slow EU approvals have been a key factor in the project’s suspension. Although Wolfspeed has not entirely abandoned the project, ZF’s withdrawal further heightens uncertainty around its realization.

Wolfspeed’s financial standing is also under pressure. According to the company’s financial reports, the fourth quarter of fiscal year 2024 showed consolidated revenue of approximately $201 million with a net loss of $174 million; the full-year consolidated revenue was around $807 million, with significant net losses. These figures highlight the challenges Wolfspeed faces in the current market environment.

Despite these challenges, Wolfspeed is actively seeking financial support. In addition to funds from the U.S. CHIPS and Science Act, the company secured an additional $750 million in new financing from an investment fund consortium led by Apollo, The Baupost Group, Fidelity Management & Research Company, and Capital Group. This funding is expected to ease some of Wolfspeed’s financial pressures.

However, Wolfspeed’s construction plans for the German Saarland plant continue to face numerous challenges. Besides declining market demand and slow EU approvals, delayed subsidies from the German government further exacerbate the company’s operational risks. Additionally, the company’s Mohawk Valley plant in New York is experiencing significant technical issues, impacting Wolfspeed’s production capacity and profitability.**