Italy, Intel Near A $5 Billion Deal for Chips Factory

Italy, Intel Near A $5 Billion Deal for Chips Factory

Intel has continued its push to establish plants across Europe, in the face of declining revenue growth that has seen the chipmaker lose its market position to rival AMD. It has since recovered though.

Reuters reports, citing sources, that the company is close to clinching a $5 billion deal with Italy to build an advanced semiconductor packaging and assembly plant in the country.

Last year, Intel announced a plan to increase chip production by building more factories. It’s part of the CEO Pat Gelsinger’s strategy to revamp the company. The plan, which came with an $88 billion investment fund, has Europe as a top choice destination.

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Having been heavily impacted by the global chip shortage, Europe is trying to cut reliance on Asian chips. The European Union had last year unveiled the European Chip Act, in a push for greater resilience and sovereignty in regional semiconductor supply chains.

Reuters reported that the two sources who spoke on anonymity, said the government of outgoing Prime Minister Mario Draghi was working to have an agreement with Intel in place by the end of August, ahead of a snap national election scheduled on Sept. 25.

Per the report, sources have previously told Reuters that Rome is ready to fund as much as 40% of Intel’s total investment in Italy, which is expected to rise over time from the initial $5 billion. It also noted that the factory would use new technologies to weave together full chips out of tiles.

The global chip shortage created a huge vacuum in production around the world and presented the need for more semiconductor companies. But for Intel, it also served as an opportunity to regain its market leadership position.

The Italian deal has the potential to give Intel its biggest production sites in Europe. The sources said the company and the government have shortlisted possible sites in two Italian regions with one of them adding they are located in the northern regions of Piedmont and Veneto.

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, the report said.

The total size of Intel’s investment and how Italy plans to fund its share of it is not yet clear, it added.

The deal will likely form a large part of Italy’s plan to build semiconductor facilities. Under the European Chips Act, the EU Commission said it had made 15 billion euros in additional public and private investment by 2030.

Besides the fund, members of the bloc are individually setting up funds to facilitate chip investments. Rome so far has set aside 4.15 billion euros until 2030 to attract chipmakers and invest in new industrial applications of innovative technologies.

Reuters noted that the government is also in talks with French-Italian STMicroelectronics, Taiwan chipmakers MEMC Electronic Materials Inc and TSMC, and Israeli Tower Semiconductor, which Intel bought earlier this year. Last month, STMicroelectronics signed a pact with GlobalFoundries to build a $5.7 billion chip factory in France.

This means that Intel will have to face familiar competitors in Europe.

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