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European nations battle to bag some of Intel's billions

US giant wants 20% of the world's chips from EU

Intel's doing a European version of Amazon HQ2: enticing governments to pledge more and more funds to subsidize the construction of chip mega-plants along with ever-growing packages of benefits.

Recent reports have named Germany, Italy, and France as potential spots for new Intel super-fabs, factories, and offices. Italy just now reportedly established a $4.6bn fund to lure Intel and its chipmaking to the nation.

The EU has noted that the continent doesn't have an advanced chip manufacturing industry like that of Asia or the US. Meanwhile, Intel has said it is looking to establish leading-edge fabs in Europe with investments potentially reaching €80bn.

Germany has an advanced economy with high-skilled labor, and companies such as GlobalFoundries already have manufacturing operations in Dresden. Italy, meanwhile, to some may not be a natural choice to establish a semiconductor fab, yet Intel is in the midst of a $5.4bn acquisition of Tower Semiconductor, which has factories in Italy, America, and Japan.

Tower's Italy facility is near Milan, where ST Microelectronics is also establishing a factory to make chips for applications such as power management. The STM fab is expected to start production this year.

New opportunities

Intel has yet to make a final call of where it will build its next European plants – an official announcement could come this week – though it has a knack at delivering surprises, and a fab could pop up anywhere, said Jim McGregor, principal analyst at Tirias Research.

"Who would have thought Intel would've been establishing a fab in Ohio," McGregor said, referring to the $20bn commitment made by the company to open component factories near Columbus in the US state.

Semiconductor plants are lucrative businesses that can uplift the surrounding economy to an extent, much like automotive manufacturing or aircraft assembly. Governments are going all out to invite Intel, and in some cases it may be better for the company to select an area where it can build from scratch rather than extend an already operational facility, McGregor said.

The recently proposed European Chips Act has a goal to strengthen the EU's electronics supply chain with steps that include boosting domestic semiconductor manufacturing capacity. The draft law will pool together €11bn of public investments to fund this.

Intel, for its part, is looking to redraw the semiconductor manufacturing map, and tapping European countries to cut their reliance on Asian countries. Over the past 30 years, semiconductor manufacturing drifted away from America and Europe to Asia, which is now making 80 per cent of the world's chips.

"My moonshot is that by the end of this decade, the US would have gone from 12 per cent to 30 per cent, Europe from nine per cent to 20 per cent [of manufacturing capacity]," Intel CEO Gelsinger said at last month's investor day meeting.

Intel already has factories in Ireland, and is expanding operations there.

Capital expenditure by semiconductor companies is expected to reach an all-time high of $190.4bn, up from $153.9bn this year, according to a study by IC Insights released on Monday.

The funds will largely go into establishing new factories, with TSMC leading the pack with a $42.4bn commitment in 2022, a 40 per cent increase from 2021. Intel was second, with a $27.4bn commitment, growing by 44 per cent compared to 2021.

As for anyone wondering about the effects of Russia's invasion of Ukraine: "We do not believe that the war in Ukraine will have an effect on the semi fab investments in Europe as these are long term strategies," Bill McClean, president at IC Insights, told The Register. "If the war would extend to NATO countries in Europe, things may be different." ®

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