UPDATE 2-Infineon, staying close to home, to build new chip plant in Austria

* To become Infineon's second 300 mm facility after Dresden

* Plant to enter production in 2021, create 400 jobs

* Austria gets nod over Malaysia in win for Europe (Writes through with detail, industry context)

VIENNA, May 18 (Reuters) - Germany's Infineon Technologies plans to build a 1.6 billion euro ($1.9 billion) chip facility in Austria, opting to add capacity in Europe rather than in Asia given trade and political uncertainty there.

The plant will become the firm's second facility after one in the east German city of Dresden that can make high-end chips on 300 millimetre wafers - a large 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.

The investment, the largest of its kind in Europe in years, is a rare win for the continent in a hardware industry that has come to be dominated by Asian players.

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 'fab'.

Construction will begin in early 2019 with investment to be spread over six years. The facility 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.


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.

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. Ploss said Infineon had only used standard incentives.

The decision also reflects a massive vote of confidence by management in an industry known for its boom and bust cycles. The Dresden fab 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 ($32.6 billion). ($1 = 0.8488 euros) (Reporting by Kirsti Knolle Writing by Douglas Busvine Editing by Maria Sheahan/Keith Weir)