Siemens to spend 1 billion euro in Germany as Berlin warns about China

By Alexander Hübner and John Revill

ERLANGEN, Germany (Reuters) - Siemens will spend 1 billion euros ($1.12 billion)on new factories and facilities in Germany, the engineering company said on Thursday, as Berlin published a strategy paper highlighting the economic and security risks of investing in China.

Chancellor Olaf Scholz visited the company's site in Erlangen, southern Germany, for the announcement which included 500 million euros to expand and modernise a factory making electronic components and machine tool controls.

The investment will increase production capacity by 60% when it is completed in 2029, although no new jobs will be created immediately at the site which currently employs 3,500 people.

Siemens wants the factory to become a showcase for the high tech manufacturing, with new production and R&D buildings being planned and simulated digitally.

News of the Erlangen investment came as Berlin published a paper responding to a more assertive China, which included warnings about security risks of investing in the country.

Germany also wants to adjust its list of goods that are subject to export controls.

Rising tensions between Beijing and the West have made many companies wary of their dependence on China, especially with U.S. attempts to block China's access to the latest technology.

Siemens, which last month unveiled a 2 billion euro global investment plan, said it was investing in Germany to accelerate growth and also "increase its resilience."

The German investment is part of the plan, which will see further investments in Europe and the United States.

"Siemens is banking on innovation in Germany and launching the next stage of digitalization," Siemens Chief Executive Roland Busch said on Thursday.

Busch reiterated China's importance as the biggest, fast-growing market for many companies, but also the need for equal treatment of all players there.

"We believe in trade and that the world gets more global. It is crucial, though, that we are on a level playing field," he told reporters.

Speaking last month, Busch said Siemens also wanted to reduce its reliance on "certain countries," without naming China.

Still, Siemens has been careful not to signal a retreat from China, its third biggest market. Under its global investment plan Siemens is also expanding its digital factory in Chengdu and building a new R&D centre in Shenzhen.

The strategy can be seen as a way of expanding capacity closer to customers and a way to overcome supply chain bottlenecks for key components after the COVID0-19 pandemic.

Other parts of Siemens's 1 billion euro Germany investment include a new semi conductor factory being built in Forchheim, near Nuremburg as well as a training centre for Siemens Healthineers in Erlangen.

($1 = 0.8954 euros)

(Reporting by Alexander Huebner in Erlangen and John Revill in Zurich; Editing by Tomasz Janowski)