Recent reports reveal that German automotive parts supplier ZF Friedrichshafen AG (ZF) plans to withdraw from a 3 billion USD joint project with U.S. chipmaker Wolfspeed to build the world’s largest 8-inch SiC chip manufacturing plant. Industry speculation suggests the reasons behind ZF’s decision are Wolfspeed’s financial struggles, repeated construction delays, and the failure of the European Union to deliver on promised subsidies.

Delays in the Construction of Wolfspeed’s 8-inch SiC Chip Factory

In January 2023, Wolfspeed and ZF announced plans to build the world’s largest and most advanced 8-inch SiC device manufacturing facility in Saarland, Germany. ZF initially intended to invest 185 million USD in the project. The factory was expected to be co-owned by ZF and Wolfspeed, but the success of the project was contingent on the EU’s subsidy commitment, which was expected to cover a quarter of the total investment.

However, in June 2023, Wolfspeed announced a delay in the plant’s construction. A company spokesperson cited the weak electric vehicle markets in both Europe and the U.S. as reasons for reducing capital expenditures. Wolfspeed said it would prioritize increasing production at its New York facility instead. Although the German project has not been canceled entirely, Wolfspeed is still seeking additional financing. The company now expects to start construction in mid-2025, two years later than originally planned.

In October, Wolfspeed announced on its website that it had signed a non-binding preliminary term sheet with the U.S. Department of Commerce. Under the CHIPS and Science Act, the Department of Commerce plans to provide Wolfspeed with up to 750 million USD in funding to support the construction of the John Palmour SiC manufacturing facility in Siler City, North Carolina, and to expand Wolfspeed’s existing plant in Marcy, New York.

Additionally, an investment consortium led by Apollo, The Baupost Group, Fidelity Management & Research Company, and Capital Group has agreed to provide 750 million USD in new financing to Wolfspeed. This funding is expected to alleviate much of the financial pressure currently facing the company.

Delayed EU Chip Act Subsidies?

While the U.S. CHIPS Act subsidies have gradually started to materialize, the EU’s 2020 European Chips Act has faced significant roadblocks in securing funding. According to Reuters, the EU’s subsidy promises attracted several major companies, including Wolfspeed, Intel, TSMC, Infineon, STMicroelectronics, and GlobalFoundries, to announce plans for new plants in Europe. However, very few of these projects have actually broken ground.

In addition to the delays in Wolfspeed’s German plant, Intel has also postponed construction of its plant in Magdeburg, Germany. On September 16, Intel’s CEO informed employees that the chip factory’s construction would be delayed by two years. Over a year ago, Intel secured a 10 billion EUR subsidy commitment from the German government. Intel had initially planned to invest over 30 billion EUR to build two cutting-edge chip factories in Germany, marking the largest foreign investment in the country’s history. However, in August 2023, the German government expressed concerns about Intel’s project in Magdeburg and devised an emergency “Plan B” in case Intel pulls out.

Industry experts suggest that both Wolfspeed and Intel are under significant financial pressure, and the delay in receiving German government subsidies has only exacerbated their operational risks. Among the announced projects, even fewer have received formal EU approval. Infineon, for example, began construction on a 5 billion EUR power chip plant in Dresden in 2023, expecting completion by 2026, though it has not yet received EU funding approval. Similarly, onsemi’s 2 billion USD investment to expand its SiC operations in the Czech Republic is still awaiting EU approval.

(Photo credit: Intel)

According to a Bloomberg report on September 12, the Chinese government is encouraging local carmakers to export knock-down kits to their overseas factories, where key car components are produced in China and then shipped to the destination markets for final assembly. This strategy aims to avoid punitive tariffs on Chinese cars, while ensuring that advanced EV technologies remain within China.

In recent months, Chinese electric vehicles have faced tariff barriers in Europe and the U.S. On May 14, the White House announced an increase in tariffs on Chinese EV imports to 100%. The European Union imposed additional tariffs on pure electric vehicles from China starting July 4. On August 26, per a report from Reuters, Canada also announced a 100% tariff on Chinese electric vehicles.

To avoid these tariffs, Chinese car manufacturers are setting up production facilities abroad. For instance, BYD signed a USD 1 billion investment agreement with the Turkish government on July 8 to build a factory in Turkey with an annual production capacity of 150,000 electric vehicles, expected to start operations by the end of 2026.

Reportedly, it’s hinted that the new factory may facilitate BYD’s entry into the European market, given Turkey’s customs union agreement with the EU. Turkey also imposed a 40% tariff on Chinese cars in June. Regarding this matter, BYD declined to comment.

The report from Bloomberg also claims that, in July, China’s Ministry of Commerce held a meeting with several car manufacturers.

During this meeting, the Ministry suggested keeping key EV technologies within China and instructed that car manufacturers should avoid making any automotive-related investments in India.

Additionally, companies planning to invest in Turkey were advised to notify both the Ministry of Industry and Information Technology, which oversees China’s EV industry, and the Chinese embassy in Turkey.

The Ministry of Commerce indicated that countries inviting Chinese car manufacturers to set up factories are typically those considering or implementing trade barriers against Chinese vehicles. Officials reportedly advised attendees not to blindly follow trends or trust investment offers from foreign governments.

The Ministry’s guidance to keep critical production within China may hinder the global expansion efforts of these manufacturers, who are seeking new customers to offset intense competition and sluggish domestic sales, factors that are impacting their profitability.

This measure could also affect European countries that have been courting Chinese manufacturers, hoping to attract job opportunities and boost their local economies.

Read more

• [News] EU Plans to Cut Tariffs on China-Made Tesla EVs from 20% to 9%, with Final Decision Expected in October
• [News] Punitive Tariffs on Chinese EVs by US Reportedly to Further Hinder BYD, Leapmotor and Others’ Global Expansion Plan, while EU Investigation Persists

(Photo credit: BYD)

Apple is set to unveil the highly anticipated iPhone 16 on September 9, with many expecting that the AI platform “Apple Intelligence” will spark a supercycle in iPhone 16 sales. However, Bloomberg suggests that the slow rollout of Apple Intelligence may make such a supercycle unlikely.

The report notes that while Apple Intelligence will be a major highlight of the iPhone 16 launch, a more refined version might not be available for some time. The initial release is expected to lack several features, including ChatGPT. Additionally, Apple Intelligence will not be launched in the EU (including Italy, France, Spain, Sweden, Germany) or China.

Even if Apple successfully convinces consumers to adopt its AI platform, reportedly, Apple Intelligence will not be available with the iPhone 16 at launch. It is expected to roll out with the iOS 18.1 update in October.

Furthermore, ChatGPT integration is scheduled for later this year, and significant new features for Siri will not be available until next year, as Apple has also decided to delay the release of its latest image generation features to the iOS 18.2 update in December, rather than in iOS 18.1.

With many features expected to be introduced gradually, the AI platform may not be sufficient to drive a large-scale upgrade cycle this year. For these reasons, the report believes that the iPhone 17, slated for next fall, is more likely to generate a supercycle.

According to Apple’s official website, Apple Intelligence will only support devices with the built-in M1 or newer processors (such as iPad Air, iPad Pro, and Mac), as well as the 2023 iPhone 15 Pro Max and iPhone 15 Pro, but not the entry-level iPhone 15.

For the first quarter this year, TrendForce reported that Apple faced a decline in sales in the Chinese market, resulting in a drop in annual production to 47.9 million units.

This decline prompted several adjustments within the component supply chain, although production plans for processor chips remained unchanged. TrendForce posits that the second quarter falls within a product iteration gap for Apple, and production is expected to decrease by approximately 10%.

Read more

• [News] Reducing Reliance on China, Apple to Produce High-End iPhones in India for the First Time
• [News] Fuelled by AI Features, Apple’s iPhone 16 Shipments Reportedly to Increase by 10%

(Photo credit: Apple)

According to a report from Economic Daily News, on the evening of August 21st, Foxconn announced plans to expand its investments, increasing capital in its subsidiaries located in the U.S., Mexico, India, and Europe. The total investment amounts to roughly USD 840 million.

First, Foxconn announced earlier that its subsidiary, Cloud Network Technology USA Inc., has acquired shares of Foxconn Assembly LLC. The transaction is valued at USD 253 million.

Sources cited by the Economic Daily News suggests that this move is looking to boost the production capacity of its plant in Houston, Texas. Foxconn currently manufactures AI servers in three locations across North America: Mexico, Wisconsin, and Texas. This indicates that Texas is gradually becoming a key hub for AI server production.

Secondly, Foxconn announced that its subsidiary, Cloud Network Technology Singapore Pte. Ltd., has acquired shares of FII AMC MEXICO S. DE R.L. DE C.V. The transaction is valued at USD 241 million.

It is speculated by the Economic Daily News that this move is primarily aimed at increasing the production capacity of Foxconn’s subsidiary, FII (Foxconn Industrial Internet), in its Mexico plant.

FII previously stated that the initial production of the GB200 servers would start in Taiwan, with the related capacity already in place.

The first overseas production line for the GB200 servers is reportedly to be set up at the Mexico plant, which is already producing AI servers, with small-scale production of the GB200 expected to begin as early as the third quarter.

Thirdly, Foxconn announced that its subsidiary, Foxconn Interconnect Technology Limited, has acquired 197 million ordinary shares of Foxconn Interconnect Technology Singapore Pte. Ltd., valued at approximately EUR 180 million (roughly USD 200.53 million).

Per Economic Daily News, it is speculated that this move is related to Foxconn’s subsidiary, FIT (Foxconn Interconnect Technology), which previously announced the acquisition of shares in the German Auto-Kabel Group to strengthen its presence in the automotive electrification sector and expand its customer base.

Lastly, Foxconn announced that its subsidiary, Foxconn Singapore Pte Ltd, has acquired 1.203 billion ordinary shares of Foxconn Hon Hai Technology India Mega Development Private Limited, valued at approximately USD 144 million .

Reportedly, it is speculated that this investment aims to boost the capital of Foxconn’s Indian subsidiary.

As Foxconn is preparing for mass production of the iPhone 16 Pro and Pro Max in India, this year marks the first time Apple is integrating AI applications (Apple Intelligence) into the latest iPhone 16 Pro series.

Read more

• [News] Foxconn Confirms Shipment of NVIDIA’s GB200 to Start in Q4 as Planned
• [News] Foxconn Remains Unfazed Despite NVIDIA’s GB200 Delay, with Customers Aim to Secure Their Orders

(Photo credit: Foxconn)

On July 4th, the EU announced a provisional anti-subsidy tariff on electric vehicles imported from China, with a final decision set for October 30th. On August 20th, the EU released a draft decision regarding the final anti-subsidy tariffs, adjusting the rates for different Chinese electric vehicle manufacturers based on the latest investigation progress.

Notably, as per a report from Commercial Times, the tariff on Tesla’s electric vehicles has been reduced from 20.8% in July to 9%. Tariffs on vehicles from BYD and Geely have also been slightly lowered.

On August 20th, the European Commission disclosed its draft decision on the final anti-subsidy investigation for electric vehicles imported from China, making slight adjustments to the proposed rates.

Tesla saw the most significant reduction, while BYD and Geely received minor cuts. Specifically, BYD’s tariff rate was reduced from 17.4% to 17%, and Geely’s from 19.9% to 19.3%.

Additionally, other companies that the EU deemed cooperative will face a tariff of 21.3%. Chinese automakers and SAIC Motor, which were assessed as not fully cooperating with the investigation, will have their tariffs adjusted from 37.6% to 36.3%.

The European Commission also decided not to retroactively impose the anti-subsidy tariffs, with the final decision expected by October 30th.

The EU maintains the opinion that Chinese electric vehicle production benefits from extensive government subsidies and thus proposes a final tariff of up to 36.3%, slightly lower than the provisional 37.6% tariff imposed on Chinese imports in early July.

In response, the China Chamber of Commerce to the EU expressed concerns, stating that both the development of the European automotive industry and reports from the EU itself show insufficient evidence that Chinese new energy vehicles have caused substantial harm to the EU market.

Source: China Chamber of Commerce

The Chamber criticized the EU’s decision to impose trade measures based on a perceived “threat of injury,” arguing that this approach contradicts WTO principles and is unacceptable to the industry.

The Chamber emphasized that the competitive edge of Chinese-made electric vehicles is not due to subsidies but rather stems from industrial scale, supply chain advantages, and intense market competition.

Read more

• [News] EU Plans to Impose Tariffs as High as 38.1% on Chinese Electric Vehicles Amid Trade War
• [News] EU Reportedly Delays Decision on Imposing Tariffs on Chinese Electric Cars

(Photo credit: Pixabay)