A project to build a €3bn factory making microchips for electric vehicles in Germany has been put on hold, adding to the crisis in the country’s hi-tech manufacturing industry. The US company Wolfspeed and the German car parts supplier ZF have postponed plans to build the EV chip factory in Ensdorf, Saarland, due to disappointing consumer demand.
The decision to suspend the project was made as Wolfspeed saw solid progress in production at its domestic factories and forecasted a slower ramp-up of the EV marketplace. This led them to believe they have enough capacity for the foreseeable future. ZF, on the other hand, stated that Wolfspeed was the one who decided not to move forward with construction, causing the planned cooperation to be put on hold.
This setback comes amid a bleak economic outlook for Germany, with the International Monetary Fund predicting flatlining economic growth this year and a 0.8% increase in 2025. The slowdown in demand for electric vehicles has impacted the European manufacturing sector and poses challenges for carmakers like Volkswagen as they transition away from fossil fuels.
The suspension of the project is also a blow to Saarland, a small state on the French border, which had been undergoing a successful transformation away from coal mining and steel crisis. The Ensdorf research and development center was planned to be built on the site of a former coal-fired power plant, highlighting the impact on the local economy.
In addition to the factory project delay, Intel also announced a freeze on plans to build two big factories in Magdeburg, citing cost-cutting measures due to global semiconductor production challenges. The German government had agreed to provide subsidies for the project to reduce Europe’s dependence on Asia in the sector.
The situation has raised concerns about the potential for mass unemployment in Germany, with companies like BASF, Thyssenkrupp, and Miele cutting well-paid positions. Chancellor Olaf Scholz has been working to stimulate the German economy and address the looming demographic crunch through reforms and measures to support industry.
The challenges faced by Wolfspeed, ZF, and other companies underscore the complexities of the transition to electric vehicles and the need for strategic planning in the face of changing market demands. The future of the EV chip factory in Ensdorf remains uncertain as stakeholders navigate the evolving economic landscape in Germany and beyond.