The European Commission has approved €319 million in Austrian state aid for semiconductor giant Infineon Technologies to help fund a €1.1 billion upgrade of its factory in Villach. The investment will enable the company to ramp up production and establish what it says will be the world’s first high-volume manufacturing facility for next-generation gallium nitride power semiconductors on 300-millimetre wafers.

The Commission said in its announcement on Wednesday 28 October that the measure, under the EU’s Chips Act, will help “strengthen the EU’s position and autonomy in the semiconductor value chain”. The bloc is seeking to reduce its reliance on semiconductor imports from third countries and establish itself as a technology leader alongside the US and China.

The EU aims to increase its share of global semiconductor production from 10% in 2023 to 20% by 2030. The Chips Act also seeks to boost demand for European-made chips and help domestic suppliers scale up.

Infineon says the investment will position its Villach site as a “global competence centre for power semiconductors”.

Austrian Chancellor Christian Stocker said the project was “one of the largest single investments in the history of Austria’s high-tech industry”.

“This is not only a strong commitment to Austria as a business location but also helps ensure that the future of the semiconductor industry will not be shaped solely in Asia or the United States, but also in Austria and Europe,” he added.

Infineon, a German company specialising in power systems and automotive semiconductors, holds a 29% market share in the former sector and 50% in automotive chips.

“This substantial investment shows our clear commitment to strengthening the European semiconductor ecosystem and Europe’s technological sovereignty,” said Jochen Hanebeck, CEO of Infineon Technologies AG.

“By establishing high-volume manufacturing on 300-millimeter wafers, we will be the first company in the world to bring gallium nitride power electronics into volume production,” he added.

A new kind of semiconductor

Infineon says it was the first company to successfully process 300-millimetre gallium nitride (GaN) wafers in 2024.

GaN power semiconductors are increasingly replacing silicon in power electronics because they can handle higher voltages, switch faster and tolerate higher temperatures.

They are used in chargers for smartphones, laptops and tablets, as well as in AI data centres, electric vehicles, solar panels, wind turbines, 5G and 6G telecoms base stations and robots. Their energy efficiency makes them particularly useful in applications where reducing power consumption is important.

The 300-millimetre wafers are larger than the conventional 200-millimetre versions, allowing 2.3 times more individual chips to be produced per wafer and lowering manufacturing costs.

Analysts expect the GaN power semiconductor market to reach approximately $3.1 billion by 2031, representing annual growth of around 35% between 2025 and 2031.

The upgrades to the Villach site are expected to be completed in 2034.