Giulio Picovaccari and Giuseppe Fonte

MILAN/ROME – Rome is preparing an offer in attempt to persuade Intel (NASDAQ: ) to invest billions in an advanced Italian chipmaking plant. Germany, however, emerges as the top contender to secure an even larger megafactory from the U.S., three sources claimed.

The plants would be part of a drive by the U.S. group to build cutting-edge manufacturing capacity in Europe to help avoid future supply shortages of the kind currently crippling the automotive industry in particular.

According to sources involved, Rome has already begun talks with Intel regarding the possible investment. It would cost more than 4 Billion Euro ($4.7 Billion).

According to one of the experts, it could reach 8 billion Euros depending on Intel’s plans.

The details of the incident are private so they were not able to provide any further information.

Sources said that Rome was ready to finance a part of the total investment using public funds and offered favorable terms for Intel including labour costs and energy prices.

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

Sources told Reuters: “The government is preparing a very specific offer in order to clinch a deal before the end of this year.”

Discussions with Intel have advanced to this point. 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.

According to sources, potential locations include Turin’s Mirafiori region, home of Italian carmaker Stellantis and Catania in Sicily. There, French-Italian chipmaker STMicroelectronics is already operating.

Intel did not comment on Intel’s plans.

The U.S. group’s biggest project in Europe is a planned megafactory, where Dresden in Germany has emerged as a leading candidate site, the sources said. They have not been directly involved in discussions about choosing the site for the megafactory.

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

TRANSFER FROM THE U.S.A TO EU

According to sources, the Italian factory will be called an “advanced packing” facility that uses advanced technologies to combine full chips from tiles made by Intel or other chipmakers.

Intel uses the technology to attract new customers, such as Amazon.com Inc. (NASDAQ:), but the company’s only locations are within the United States.

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 stated last month that the company will announce two new major EU chip manufacturing plants locations by the end of the year. The company plans to invest 80 billion euro over the next 10 years on Europe.

CHIPS ARE DOWN

This comes as the European Union strives to lessen its dependence upon semiconductor supplies from China and the United States.

The surge in consumer electronics, such as smartphones and computers, has led to chipmakers scrambling for ways to improve their production.

Automotive, a key pillar of Europe’s economy, has been hardest hit by the shortages. Chipmakers tend to prefer consumers electronics customers as they are more sophisticated and have higher margin chips.

Mario Draghi (the Italian Prime Minister) said that this week, the EU had to take action “now” in order to produce 20% more semiconductors by 2030.

He said that “China and America are investing in this sector already tens to billions per each.”

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 said that Intel intends to make available capacity in its Ireland chip plant to automakers, and then help them to switch to Intel’s technology. But that is another thing that may take time.

GERMANY IS IN THE LEAD

After the September federal elections, talks could accelerate.

Sources claim that the EU’s largest economy with large auto industry is leading the charge to get the megafab plant. France, however, remains in contention.

Sources claimed that Italy has “cards of play” in order to acquire a research center. It is also part of an overall investment Intel is making for Europe.

($1 = 0.8593 euros)