Staying close to home, Infineon to build new chip plant in Austria

By Kirsti Knolle

VIENNA (Reuters) - Germany's Infineon Technologies (IFXGn.DE) plans to build a 1.6 billion euro (1.4 billion pound) chip facility in Austria, in a major strategic bet on Europe at a time of growing trade and political uncertainty in Asia.

The plant will become the firm's second facility after one in the east German city of Dresden that can make power chips on 300 millimetre-diameter wafers - a large, thin, format where Infineon claims a technology and cost lead over its competitors.

The investment is a coup for Chancellor Sebastian Kurz's right-wing coalition government, with Infineon preferring Austria to its other foreign base in Malaysia, which has just seen a dramatic election upset.

It follows a $1.2 billion (890 million pound) greenfield investment by Germany's Robert Bosch last year in Dresden, where GlobalFoundries has also invested a total of $12 billion in semiconductor production since the 1990s.

Infineon has long been present in Austria and the plant, in the Carinthian city of Villach, will be based on an existing research facility that specialises in developing the high-performance chips produced at the Dresden facility.

Construction will begin in early 2019 with investment to be spread over six years. The new plant will enter production in early 2021, target annual sales of 1.8 billion euros, and create 400 new jobs.

"We will be in a position to deliver from two locations," Infineon CEO Reinhard Ploss a news conference in Vienna attended by Kurz and other Austrian government leaders.

"Our customers are pouring in through the doors and it's important for us to be able to serve them."

Ploss, who is German, has spent much of his career in Austria. He was country CEO for Infineon in the early 2000s, after it was spun out from conglomerate Siemens (SIEGn.DE).

DIGITAL REVOLUTION

Infineon's power-management chips are used to extend the battery life of smartphones and laptops; maximise the driving range of electric vehicles; and optimise the performance of wind turbines or solar collectors.

That makes its product range a play on the major industry trends of digitalisation and renewable energy. The company, headquartered in Munich, is also developing chips to enable futuristic technologies such as self-driving cars.

Villach will also explore using silicon carbide, a semiconductor seen as more efficient than traditional silicon in managing electric-vehicle batteries that has been championed by rival STMicroelectronics (STM.PA).

Kurz said he was delighted by an investment of such size in a country of just 8.8 million people. "Especially in key technologies it is important for us in Europe not only to catch up, but to get ahead," he told reporters.

Austria made available a package of subsidies to land the investment. Details weren't revealed but officials said the sums involved would be covered by existing spending plans.

The decision also reflects a massive vote of confidence by management in an industry known for its boom and bust cycles. Dresden is expected to hit maximum capacity in 2021, the year Villach is due to enter production, the company said.

Infineon, which according to IHS Markit is the global market leader in power chips, recently nudged up its guidance for revenues in its business year to Sept. 30, citing strong orders.

It now expects revenues to grow by between 4 and 7 percent. Infineon's shares traded down 0.9 percent in Frankfurt, valuing the company at 27.7 billion euros.

(Reporting by Kirsti Knolle; Writing by Douglas Busvine; Editing by Maria Sheahan/Keith Weir)