Italy, Intel Close To $5bn Chip Factory Agreement

Europe’s efforts to develop more chip plants in its economic zone may have moved one step closer, amid reports that an agreement for an Intel factory in Italy is close.

The initial investment in Italy is said to be worth $5 billion and would see Intel construct an advanced semiconductor packaging and assembly plant in the country, two sources told Reuters.

The Italian factory has been on the cards for a while now. In October 2021 it was reported that Italy was negotiating with Intel to build a 4 billion euro (£3.4bn) advanced chip packaging plant in the country, as the chip giant pushed ahead with major expansion plans within the EU.

Italian factory

At the time it was understood that Italy was prepared to fund part of the overall investment in the plant and offer other favourable terms to Intel, including on labour matters and energy costs.

The plant would employ more than 1,000 people directly in Italy.

Then in December Intel and Italy reportedly intensified talks to build an advanced semiconductor packaging plant in the country.

Now Reuters is reporting that Italy is close to clinching a deal initially worth $5 billion with Intel, which is eyeing locations in the northern regions of Piedmont and Veneto for the plant.

The sources told Reuters the government of outgoing Prime Minister Mario Draghi is working to have an agreement in place by the end of August, ahead of a snap national election scheduled on 25 September.

Sources have previously told Reuters that Rome is ready to fund as much as 40 percent of Intel’s total investment in Italy, which is expected to rise over time from the initial $5 billion.

Rome so far has apparently set aside 4.15 billion euros until 2030 to attract chipmakers.

Draghi’s office and Intel both reportedly declined to comment.

The factory would use new technologies to weave together full chips out of tiles.

A final decision on where to build the facility is yet to be made, both the sources said.

The Lombardy, Apulia and Sicily regions had also been considered initially.

EU Chips Act

The European Union is working hard to encourage more chip manufacturing within its borders, following the global chip shortage during the Covid-19 pandemic.

In March 2021 the European Union under its 2030 Digital Compass plan announced it wanted to produce at least 20 percent of the world’s cutting-edge semiconductors by the end of the decade.

In February this year the EU proposed the European Chips Act to help EU countries offer financial incentives for the building of chip factories.

The ‘European Chips Act’ is touted as a way to bolster Europe’s self sufficiency in the semiconductor sector, by easing state aid rules, improving tools to anticipate shortages and crisis, and strengthen research capacity in the bloc.

It should be remembered that chip companies typically require substantial cash incentives or tax breaks, in return for building an expensive chip factory in a particular location.

Intel CEO Pat Gelsinger in March 2021 for example said the chip giant was looking for 8 billion euros (£7bn) in public subsidies toward its planned semiconductor fabrication plant in Europe.

Then in September last year Gelsinger said Intel could potentially invest as much as 80 billion euros ($95bn or £69bn) to expand chip production in Europe.

And EU countries are responding.

In April the Spanish government outlined plans to invest as much as 11 billion euros ($12.4bn) to boost the country’s chip industry.

Then in May Germany’s Economy Minister Robert Habeck said that the German government wanted to attract chip makers with 14 billion euros ($14.71 billion) in support.

European factories

And a number of European factories have already been confirmed.

In mid March this year, after countless reports and rumours, Intel confirmed it would build a chip factory in Magdeburg, Germany.

Intel said it would invest an initial 17 billion euros into a leading-edge semiconductor fab mega-site in Magdeburg.

The chip giant also said it would create a new R&D and design hub in France.

Meanwhile STMicroelectronics last month signed a pact with GlobalFoundries to build a $5.7 billion chip factory in France.

But the EU has not has everything go its own way.

In June the world’s largest chip maker, Taiwan Semiconductor Manufacturing Co (TSMC) said it had no concrete plans for factories in Europe, rebuffing the prospect of Taiwanese tech firms making advanced semiconductors in the European Union.