German chipmaker Infineon will invest about €1.1bn in its site in Villach, Austria, to make power chips from gallium nitride, the company announced on Tuesday.

It says the plant will be the first in the world to make these chips in large volumes on 300mm wafers.

Power chips control how electricity flows inside devices, from chargers to servers. Most are made from silicon, but gallium nitride, or GaN, switches faster, wastes less energy and runs cooler.

That makes it useful wherever large amounts of power have to be handled efficiently. Infineon is aiming the chips at AI data centres, energy networks, electric cars and robots.

“This paves the way for the widespread use of gallium nitride in a wide range of key applications,” said chief executive Jochen Hanebeck.

The move to 300mm wafers is what should bring the cost down. A wafer that size holds about 2.3 times as many chips as the 200mm wafers more commonly used for GaN today, according to Infineon. The company first produced 300mm GaN wafers in 2024.

Infineon plans to start production by the end of 2027 and to keep investing in the site until 2034. Because it will build the new lines inside cleanrooms it already has in Villach, the company says the expansion will cost less than a new plant. It will then increase output in line with demand.

Part of the cost will be covered by the state. The European Commission has approved €319m in aid under the EU Chips Act, which aims to bring more chipmaking to Europe. Austria’s economy ministry still has to give its formal approval.

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

Infineon already employs about 4,800 people in Villach and about 5,800 across Austria, although it did not say how many jobs the new plant would add.

On the stock market, Infineon shares rose almost 1% in early trading in Frankfurt on Tuesday, after falling about 40% since mid-June.

The project joins other chip plants in Europe backed with EU-approved aid, such as TSMC’s factory in Dresden.