German technology company Bosch has agreed to buy key assets of California chip manufacturer TSI Semiconductors and plans to invest $1.5 billion to expand U.S. production of silicon carbide chips that is used in electric vehicles (EVs). Although the two companies did not disclose the purchase price, Bosch said in was planning to invest $1.5 billion to retool the facility in California to start production by 2026. The investment “will be heavily dependent on federal funding opportunities” through the CHIPS act as well as state subsidies, Bosch said in a statement.

Bosch also said the TSI facility would become the “third pillar” of in-house semiconductor production, along with two sites in Germany.

Like most other automotive manufacturers, Bosch has been impacted by the global chip shortage, exacerbated by the pandemic. Those shortages have eased but not gone away. Bosch’s automaker customers have continued to push for more secure, diversified sources of chips.

The silicon carbide chips Bosch said it will manufacture at the TSI site are increasingly in demand by EV makers. The silicon carbide chemistry enables greater driving range and faster recharging, Bosch said.

Demand for silicon carbide semiconductors is growing by 30% annually, Bosch further stated.

Thanks to that demand, there has been a surge in chip investments. U.S-based Wolfspeed is building new plants to make silicon carbide chips in the state of New York and in Germany. Another U.S. chipmaker Onsemi is also investing heavilyin silicon carbide and has signed a strategic supply agreement with Volkswagen.

The TSI site currently is a foundry for application-specific integrated circuits, or ASICs used in various industries, Bosch said.

Bosch plans to acquire the buildings, machines and infrastructure of TSI as well as well as its commercial semiconductor business. After re-tooling the factory, Bosch said it plans to start producing silicon carbide chips in 2026.