Intel close to deal for semiconductor plant in Italy

Chip giant's efforts to building production capacity outside of Asia gains steam

Updated Intel is preparing to close a deal worth at least $5 billion that will see the chip giant build a semiconductor plant in Italy.

The move is part of previously unveiled plans by Intel to invest in building capacity up across Europe.

The global chipmaker is aiming to sign a deal with the Italian government that will see it build an advanced semiconductor packaging and assembly plant in the country, according to the Reuters newswire.

Anonymous sources familiar with the matter have disclosed that the government of outgoing Prime Minister Mario Draghi is working towards getting an agreement in place later this month, before the general election that is scheduled for September.

The Italian government is prepared to fund at least 40 percent of the cost of Intel's investment in the country, which is expected to start at $5 billion but likely to expand over time. The plant Intel is building will be used to package chips that have been manufactured elsewhere, rather than making them on site.

Italy said in a report on its National Reform Program in June 2022 [PDF] that it had set aside a fund designed to promote investments in microelectronics with a total budget of €4.15 billion ($4.25 billion) from 2022 to 2030.

We asked Intel for confirmation regarding its plans for a semiconductor plant in Italy, and will update this article if the chipmaker responds.

Intel had already announced plans last year to expand its chipmaking facilities across Europe, saying it expected to invest at least €80 billion (about $81.8 billion) in its semiconductor manufacturing infrastructure across the continent over this decade.

Earlier this year, Intel announced its decision to build a manufacturing mega-fab at a site in Magdeburg in eastern Germany, after considering a number of possible locations in countries such as France, Belgium, Poland, and the Netherlands.

This manufacturing site will see an initial investment of €17 billion (about $17.4 billion), according to Intel’s announcement at the time, with a proposal to also spend big on manufacturing, research and development and chip design in Ireland, France and elsewhere.

This is part of the recognition by Intel that it is too reliant on chipmaking capacity in Asia, and needs to balance this by establishing more fabs in other parts of the globe.

"Today 80 percent of chips are produced in Asia. Our landmark pan-European investment addresses the global need for a more balanced and resilient supply chain," Intel CEO Pat Gelsinger said during the announcement of its European investment.

The decision by Intel to invest in Europe also followed the announcement from the European Commission earlier this year of the European Chips Act, legislation aimed at bolstering Europe’s semiconductor industry with upwards of €43 billion (about $44 billion) of investment by the end of this decade into research and development, as well as to attract chipmakers to set up manufacturing sites.

Intel is also expected to be a key beneficiary of the recently passed CHIPS and Science Act in the US, which aims to direct $52 billion of its budgeted funds towards the construction of semiconductor manufacturing facilities on US soil. ®

Updated to add on 5 August:

Intel has been in touch to say: "As we announced in March, Intel and Italy entered into negotiations to enable a state-of-the-art back-end manufacturing facility. The negotiations are ongoing and confidential. We are not ready to provide further detail at this time."

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