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ZF planned to invest $185 mln in Saarland plant

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Wolfspeed ( WOLF ) postponed project due to weak demand, source

says

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Germany seeking to halt de-industrialisation of economy

(Changes source and writes through, adding detail and

background)

By Ilona Wissenbach

FRANKFURT, Oct 22 (Reuters) - German automotive supplier

ZF intends to withdraw from a planned $3 billion

microchip manufacturing project with U.S. chipmaker Wolfspeed ( WOLF )

in western Germany, an industry source said on Tuesday.

The rethink followed Wolfspeed's ( WOLF ) 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 ( WOLF ) 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 ( WOLF ) and

German economy ministry representatives were not immediately

available for comment.

Reuters reported last June that Wolfspeed ( WOLF ) had delayed its plans,

with funding still being sought and construction not set to

start until mid-2025 at the earliest.

The plant was not scrapped entirely, a Wolfspeed ( WOLF )

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 ) 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.