German Chancellor Olaf Scholz once proudly boasted that Intel's Magdeburg wafer fab and Wolfspeed's Eisenach wafer fab projects demonstrate Germany's potential to become a major player in the semiconductor industry.

Both of these projects are now in a 'indefinite' state.

Just as Intel confirmed last month the suspension of the high-budget German factory with a total investment of up to 30 billion euros, similarly, the large US semiconductor factory Wolfspeed also issued a statement on Tuesday stating that due to the slower-than-expected adoption rate of electric vehicles, the plan to build the next factory in Ens Dorf is currently on hold.

(Note: In February last year, after Wolfspeed announced the construction of the factory, Schulz and Wolfspeed CEO Gregg Lowe took a group photo at the site of the planned factory to celebrate)

Wolfspeed originally planned to build a factory in the western German town of Ens Dorf with a total investment of up to 2.7 billion euros, aiming to produce silicon carbide chips widely used in electric vehicles, primarily in power components such as inverters, converters, and on-board chargers. The Federal Government of Germany and the Saarland Government will provide subsidies of 0.36 billion euros and 155 million euros, respectively, while the local joint venture partner ZF plans to contribute 0.17 billion euros.

Evidently, times have changed, and US chip factories have different ideas now.

Wolfspeed stated that the company now has the ability to support customers' prefetch growth schedules in the foreseeable future. The company specifically mentioned the facilities being built in North Carolina and New York states, along with the increase in productivity.

The company stated that although the global silicon carbide semiconductor market's long-term prospects remain strong, its own market research and reports from electric car manufacturers in the past few quarters indicate that the growth rate of electric car adoption is more moderate than previously forecasted.

From the perspective of industry competition, Wolfspeed is currently facing stronger competition from more financially capable opponents. According to TrendForce's data, Wolfspeed ranks fourth among global silicon carbide power device manufacturers, trailing behind STMicroelectronics, ON Semiconductor, and Infineon.

"Subsidy Attraction" Raises Questions

There is no doubt that the continuous failure of important investment promotion projects within just two months will undoubtedly tarnish the image of the Soltz government.

Julia Klerkner, a member of the opposition Christian Democratic Party, criticized: "Another government's facade project has been shelved, the subsidy bubble has burst, and now we can only come to one conclusion: The Soltz Alliance's economic policies have failed."

In response, Saarland's Minister President, Anke Rehlinger, stated on Wednesday that the Wolfspeed project has not been abandoned, but just delayed to an uncertain future point in time. Wolfspeed also emphasized that Enscheidorf is still the company's preferred location for potential expansion in Europe.

Oliver Holtemeier, an economist at the Leibniz Institute for Economic Research, stated that the decisions of Intel and Wolfspeed show that Germany's use of billions of euros in state subsidies to attract investments from global tech giants has proven to be ineffective. Oliver emphasized: "These subsidies... have not addressed the real obstacles to investing in Germany. The German government should focus on improving the business environment that affects all companies, including those that have not yet been established."

In this case, it's not just Germany that has been frustrated. Germany is also an important part of the EU's plan to double the regional semiconductor market share from 10% to 20%. This vision is established by the EU under increasing reliance on asian companies such as taiwan semiconductor and Samsung Electronics in the technology industry.

For Scholz, his chip subsidy project represents the "last hope" - taiwan semiconductor plans to invest 10 billion euros to build a new factory in Dresden, a city in eastern Germany. Partners include nxp semiconductors, Bosch and Infineon. The German government has promised to provide a subsidy of 5 billion euros.

(Construction of Taiwan Semiconductor's factory in Germany began in August this year, source: social media).

According to the plan, with the official start in August of this year, Taiwan Semiconductor's German factory is expected to be operational by the end of 2027.

Editor/rice