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Italy woos Intel over multibillion-euro chip plant: Sources

On Tuesday Oct. 19, 2021, a sign was placed at the Santa Clara headquarters of Intel.

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Rome has a proposal to make to be convinced Intel to invest billions of euros in an advanced chipmaking plant in Italy, as Germany emerges as frontrunner to land an even bigger megafactory planned by the U.S. company, three sources said.

They would form part of the U.S. Group’s drive to create cutting-edge European manufacturing capacities to aid in avoiding future supply shortages of the kind currently crippling the automotive industry in particular.

The sources familiar with the talks said that Rome is currently in discussions with Intel over the possibility of an investment. According to preliminary estimates, it would amount more than 4 billion euros ($4.7 billion).

According to Intel’s plans, one source claimed that the sum could rise up to 8 billion euros.

Because the information is confidential, they declined to identify themselves.

According to sources, Rome will fund a portion of the investment using public money. It also offers favorable terms to Intel on labor costs.

They also stated that more than 1,000 jobs would be created by the factory in Italy.

One source told Reuters that the government was preparing a detailed proposal with the goal of clinching a contract by the end the year.

The discussions with Intel are in an advanced stage. While there’s no agreement yet, the government should work diligently to make it possible for the plant in Italy to be brought into operation.

Some potential sites are the Mirafiori region in Turin, Italy. This is where carmaker Carrefour lives. StellantisCatania in Sicily is home to a French-Italian chipmaker STMicroelectronics already operates, the sources said.

Intel refused to comment on the plans.

Sources say that the U.S.-based group is currently working on Europe’s largest project, a megafactory. Dresden has emerged as an attractive candidate for this site. The talks over the location of the megafactory aren’t directly between them and the sources.

The sources stated that no decision was made on either site, and plans could be altered in the weeks ahead.

From U.S. to EU

France also appears to be a contender for megafactory. Italy is competing against Poland (where Intel has a presence) for the packaging facility.

Intel CEO Pat Gelsinger said last month the company would announce the locations of two major new EU chip fabrication plants by year-end as it looks to spend 80 billion euros over the next decade on the continent.

Chips are low

These plans are being made at a time when the European Union seeks to decrease its dependence on the United States or China for semiconductor supplies. The chip shortage is not expected to abate.

After the explosion in demand for smartphones, computers and other consumer electronics during the pandemic, chipmakers are trying to increase their output.

As chipmakers prefer consumer electronics customers, who tend to buy higher-margin, more sophisticated chips, the shortages in the automotive sector have been devastating.

Mario Draghi, the Italian Prime Minister, stated this week that the EU must act now and decisively to boost output in order to reach its goal of producing 20% by 2030.

He stated that both China and the U.S. have already invested tens or billions in this area.

Nevertheless, the construction of the megafactory as well as the packaging plant could take many years. It is not likely to benefit European carmakers in the near future.

Gelsinger stated that Intel will reserve its Irish chip factory capacity for automakers to help them switch to its technology. However, that could also take some time.

Germany leads the way

The German federal election in September has seen a new government formed. This could help speed up negotiations.

According to sources, Europe’s second-largest economy is likely to be the one that will land the megafab facility. France however remains in contention.

According to one source, Italy had also “cards in play” for a Research Centre. This is another component of the investment Intel has made to prepare for Europe.

Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.