Officials say the move will create hundreds of jobs and ease concerns for Saarland’s 40,000 auto industry workers, many of whom make internal combustion engine parts.
ZF and Wolfspeed hope to make a final decision on the subsidy within the next few months, the people said.
The partners plan to begin semiconductor production in 2027 and reach full capacity by 2030.
Spokespeople for ZF and Wolfspeed declined to comment on the plans.
Handelsblatt I previously reported the details of the project.
The Saarland wafer fab will help reach the EU’s ambitious goal of producing 20% of the world’s chips by 2030.
High energy prices and generous US subsidies under the Inflation Reduction Act have made it increasingly difficult for Germany to attract international semiconductor manufacturers.
US chip maker Intel recently postponed the start of construction on its €17 billion ($18.4 billion) chip plant in Magdeburg.
The company is negotiating increased government subsidies to offset rising costs.
The type of chip manufactured by Wolfspeed charges faster than traditional silicon chips and can increase the range of EVs by up to 15%.
In addition to the plant, ZF and Wolfspeed also plan to set up an R&D center in Germany, with ZF becoming the majority owner, the people said.
The center will research chip applications in power inverters for electric ships and wind turbines.
Wolfspeed CEO Gregg Lowe said last year that the company was considering building a semiconductor factory in Germany and that investment decisions would depend on the subsidies it receives.
ZF ranks third car news europe With $33.4 billion in sales to automakers in 2020, it is on the list of the world’s top 100 suppliers.