Supantha Mokherjee, Foo Yan Chee and Jane Lanhee Lee

STOCKHOLM/BRUSSELS/SAN FRANCISCO (Reuters) – Intel (NASDAQ:) has picked Germany as the site for a huge new chipmaking complex, giving the first details of a $88 billion investment drive across Europe, which is striving to cut its reliance on imports and ease a supply crunch for manufacturers.

This plan was made by the largest semiconductor manufacturer. The industry is trying to keep up with the boom in chips that are used in smartphones and cars. However, there won’t be a quick fix since the new German plants won’t go online until 2027.

American chipmaker Chipmaker plans to spread its investment around six dozen countries. This includes expanding its factory in Ireland and setting up research and design facilities in France and Italy.

Initial spending is expected to reach 33 billion euro ($36 billion), with 17 billion Euros in Germany. The auto industry will be the prime market for cutting-edge chips, which could employ technology as small and as tiny as 2-nanometers.

Volkswagen (DE) – German carmaker Volkswagen highlighted Tuesday the problems caused by shortages of chips, and said it sold two millions fewer vehicles than anticipated last year because of the problem.

Intel’s announcement follows the European Commission’s last month release of plans to stimulate chip manufacturing in Europe. It proposed new legislation, which would ease state aid regulations for chip factories. This will also allow for $17 billion more public and private investments.

In order to create more efficient and smaller-sized chips to be used in premium smartphones, such as Apple (NASDAQ)’s newest iPhones which use 5-nanometer chips technology, chipmakers are trying to increase the number of factories that they can build. One nanometer measures only a few atoms.

Stacy Rasgon, Bernstein Research analyst was optimistic that Intel would be able to manage investments to meet demand in the future and supported government subsidies.

“[Intel]Rasgon explained that capacity is being used as a strategic weapon. Rasgon stated, “If you have any spare time and want to go around asking for money in order to construct semiconductor manufacturing plants, now is it.”

BIG INCENTIVES

It announced that Intel would build two factories at Magdeburg in Germany. This will create 7,000 jobs for construction workers, 3,000 permanent positions and thousands more jobs through suppliers and partners.

An additional 12 billion euro will be invested by the company in an Irish facility, which will increase its overall investment in Ireland to greater than 30 billion.

The company is in negotiations with Italy to build a chip-assemble and packaging facility. It could invest up to 4.5 Billion Euros and will be operational between 2025-2027.

Intel is building its European research center in France. This will create 1000 new jobs in high tech technology.

It will increase its laboratory space in Poland, and it plans to create joint labs with Barcelona Supercomputing Center in Spain. This is for advanced computing.

Intel CEO Pat Gelsinger has announced plans in September for $88 billion to be spent in Europe over 10 years. The choice of locations comes after many EU governments, including Italy, gave big incentives to the chipmaker in order to attract them to invest in their respective countries.

It could be beneficial for the company to have its factories spread around various locations in order to receive more subsidy from other countries.

But Intel will need to negotiate with all European countries where it is locating facilities for State Aid, European Industry Commissioner Thierry Braton explained to journalists.

The Commission is also in discussions with chipmakers, and hopes to announce similar announcements over the next months. However, he did not give details.

($1 = 0.9098 euros)