German automotive supplier ZF (ZFF.UL) intends to withdraw from a planned $3 billion microchip manufacturing project with U.S. chipmaker Wolfspeed (WOLF.N) in western Germany, an industry source said on Tuesday.
The rethink followed Wolfspeed's decision to put the project on hold because of weaker than expected semiconductor demand and doubts whether its entry into the European market would be worthwhile, the source told Reuters.
ZF had been set to contribute $185 million for a stake in the Saarland plant, which was to make chips for electric cars.
Wolfspeed announced plans for the plant and a research and development centre in Germany in February 2023. If the plans are shelved, it would represent another setback to German efforts to sell the country as an attractive location for business.
ZF declined to comment on the matter, while Wolfspeed and German economy ministry representatives were not immediately available for comment.
The plant was not scrapped entirely, a Wolfspeed spokesperson said at the time, adding that the company was focused on ramping up production in New York after spending cuts in response to weakness in the European and U.S. electric vehicle markets.
Rival U.S. chipmaker Intel (INTC.O) said last month that it was delaying construction on a plant in eastern Germany by two years as part of its cost-cutting plans.
The setbacks come against a backdrop of efforts by German Chancellor Olaf Scholz to reinvigorate Europe's largest economy despite deindustrialisation in the face of high energy costs and regulatory hurdles.
"We need more growth. The pie has to get bigger again," Scholz told the BDA employers' association earlier on Tuesday, promising to work with industry to revive growth.
