Italy woos Intel over multibillion-euro chip plant -sources

Sherritt International

22/10/2021 14:23

By Giulio Piovaccari and Giuseppe Fonte
    MILAN/ROME, Oct 22 (Reuters) - Rome is drawing up an offer
to try to convince Intel  INTC.O  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.
    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.  urn:newsml:reuters.com:*:nL8N2MN4O1 
    Rome is already in talks with Intel about the potential
investment, which according to preliminary estimates would be
worth more than 4 billion euro ($4.7 billion), the sources who
are involved in the discussions said.
    One of them said the total could even reach around 8 billion
euros, depending on Intel's plans.
    They declined to be identified because the details are
confidential.
    Rome is ready to fund part of the overall investment with
public money and offer favourable terms to Intel, including on
labour and energy costs, the sources said.
    The factory would create more than 1,000 direct jobs in
Italy, they added. 
    "The government is preparing a very detailed offer with the
aim of clinching a deal by the end of the year," one of the
sources told Reuters. 
    "Discussions with Intel are at an advanced stage. There is
no deal yet, but if the government works hard on this it has a
good chance of bringing the plant to Italy."
    Potential sites include Turin's Mirafiori area, the Italian
home of carmaker Stellantis  STLA.MI , and Catania in Sicily,
where French-Italian chipmaker STMicroelectronics  STM.BN 
already operates, the sources said.
    Intel declined to comment on its 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 are not directly
involved in talks about the choice of site for the megafactory.
    No final decision has been made for either site and plans
could change in the coming weeks, the sources said.
    
    FROM U.S. TO EU
    The Italian factory would be an "advanced packaging" plant
that uses new technologies to weave together full chips out of
tiles produced by Intel and other chipmakers, the sources said. 
    Intel is using the technology to draw in new customers such
as Amazon.com Inc's  AMZN.O  cloud computing unit, but its only
sites are in the United States.
    France is also seen as contender for the megafactory, while
Italy faces competition from Poland, where Intel also 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.  urn:newsml:reuters.com:*:nL1N2Q91CF
    
    CHIPS ARE DOWN
    The plans come as the European Union aims to reduce its
dependence on semiconductor supplies from the United States and
China, and the chip supply crisis shows no signs of abating.
    Chipmakers are scrambling to boost output after the
work-from-home trend during the pandemic led to explosive demand
for consumer electronics such as smartphones and computers.
    The shortages have hit the automotive industry - a major
pillar of the European economy - the hardest, as chipmakers have
generally preferred consumer electronics customers because they
buy more advanced, higher-margin chips.    
    Italian Prime Minister Mario Draghi said this week the EU
needed to act "now and decisively" to increase output to meet
its target of producing 20% of the world's semiconductor output
by 2030.
    "China and the U.S. are already investing tens of billions
each in this sector," he said.
    Still, building the megafactory and packaging plant will
take years and is unlikely to help European automakers in the
short term.
    For that, Gelsinger has said Intel plans to reserve capacity
at its chip factory in Ireland for automakers and help them
shift to using its technology, but that too could take time.

    GERMANY IN THE LEAD
    Talks could speed up after a new government is formed in
Germany, following September's federal elections. 
    The EU's biggest economy, with a large car industry, is in
the lead to land the "megafab" plant, the sources said, though
France remains in the running.
    One of the sources said Italy also had "cards to play" to
obtain a research centre, which is another part of the overall
investment Intel is preparing for Europe.
    ($1 = 0.8593 euros)

 (Additional reporting by Stephen Nellis in San Francisco and
Angelo Amante in Rome
Writing by Giulio Piovaccari
Editing by Josephine Mason and Mark Potter)
 ((giulio.piovaccari@thomsonreuters.com))