Italy is wooing Intel for a multi-billion dollar chip factory: sources

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Signage at the entrance to Intel headquarters in Santa Clara, California, the United States, on Tuesday, October 19, 2021.

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Rome creates an offer to convince Intel to invest billions of euros in an advanced chip factory in Italy as Germany emerges as the frontrunner in landing an even bigger mega-factory from the US company, three sources said.

The plants would be part of an initiative by the US group to develop state-of-the-art manufacturing capacities in Europe in order to avoid future risks Delivery bottlenecks such as are currently paralyzing the automotive industry in particular.

Rome is already in talks with Intel about the potential investment, which according to preliminary estimates would have a value of more than 4 billion euros (4.7 billion US dollars), said the sources involved in the discussions.

One of them said that the sum could even reach around 8 billion euros, depending on Intel’s plans.

They refused to be identified as the details are confidential.

Rome stands ready to fund part of the total investment with public money and offer Intel favorable terms, including labor and energy costs, the sources said.

The factory would create more than 1,000 direct jobs in Italy, they added.

“The government is preparing a very detailed offer with the aim of closing a deal by the end of the year,” one of the sources told Reuters.

“Talks with Intel are at an advanced stage. There is no deal yet, but if the government works hard, they have a good chance of bringing the plant to Italy.”

Possible locations include Turin’s Mirafiori area, the Italian home of the automaker Stellantis, and Catania in Sicily, where the Franco-Italian chip maker STMicroelectronics already operates.

Intel didn’t want to comment on its plans.

The largest project of the US group in Europe is a planned megafactory, in which Dresden has emerged as one of the leading candidate locations, it said from the sources. They are not directly involved in discussions about the choice of location for the megafactory.

A final decision has not been made for either location, and plans may change in the coming weeks, the sources said.

From the USA to the EU

The Italian factory would be an “advanced packaging” factory that uses new technology to weave complete chips together from tiles from Intel and other chip makers, the sources said.

Intel uses the technology to attract new customers such as Amazon’s cloud computing unit, but its only locations are in the United States.

France is also considered a contender for the megafactory, while Italy has competition from Poland for the packaging system, where Intel is also represented.

Intel CEO Pat Gelsinger said last month that the company will announce the locations of two large new EU chip factories by the end of the year as it plans to spend 80 billion euros on the continent over the next decade.

Chips are down

The plans come as the European Union wants to reduce its reliance on semiconductor supplies from the US and China and the chip supply crisis shows no signs of subsiding.

Chipmakers are scrambling to ramp up production after the trend towards home work during the pandemic created explosive demand for consumer electronics such as smartphones and computers.

The scarcity has hit the automotive industry – a key pillar of the European economy – the hardest, as chipmakers generally favor consumer electronics customers because they buy more advanced chips with higher margins.

Italian Prime Minister Mario Draghi said this week that the EU must act “now and decisively” to increase production in order to meet its target of 20% of global semiconductor production by 2030.

“China and the US are already investing tens of billions each in this sector,” he said.

Still, the megafactory and packaging plant will take years to build and is unlikely to help European automakers in the short term.

Intel plans to reserve capacity for automakers at its chip factory in Ireland and help them transition to using its technology, according to Gelsinger, but that too could take time.

Germany in the lead

Talks could accelerate after the formation of a new government in Germany following the general election in September.

The EU’s largest economy with a large auto industry is leading the way in attracting the “Megafab” plant, the sources said, although France remains in the running.

One of the sources said Italy also “had cards to play” to get a research center, which is another part of the total investment Intel is preparing for Europe.


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