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Intel casts doubt on Italy for chip factory location

What is this... the Eurovision chip contest?

Intel appears to be casting doubt on previous proposals to build a chip factory in Italy, as the company plays off European countries against each other for the privilege of hosting its production facilities.

At the World Economic Forum in Davos, Intel CEO Pat Gelsinger told Italian newspaper Corriere della Sera the chipmaker is moving forward with the gamne plan for a semiconductor fabrication plant in Germany, but its other proposition to site an advanced semiconductor packaging and assembly facility somewhere in Italy are still up in the air.

Italy is still in the game, but so are other candidate countries...

Gelsinger reportedly said that the uncertainty was partly due to the European Chips Act not yet being approved, with the legislation expected to unlock funding to boost the semiconductor industry in Europe, including subsidies for companies including Intel to build fabrication facilities.

When it comes to the packaging plant, Gelsinger said that "Italy is still in the game, but so are other candidate countries. We're trying to see where. We'll decide within the year."

The news comes just days after the Italian government declared it was still determined to secure a decision from Intel to base a chip factory in the country, while Prime Minister Giorgia Meloni said in December that she considered Intel's investment as “highly strategic” and was seeking a meeting with the company to facilitate it, according to Reuters.

It was reported in August that Intel and the Italian government were supposedly close to sealing a deal worth at least $5 billion to have the company locate its semiconductor packaging and assembly plant there.

At the time, it was said that the Italian government was prepared to fund at least 40 percent of the cost of Intel's investment in the country, which could lead to further infrastructure being established there in future.

In response to a query regarding its plans with regards to Italy, Intel told us: “We continue to progress our discussions with Italy regarding a state-of-the-art back-end manufacturing facility and remain excited about the project. This is in addition to other projects that we are considering in other parts of the world, where we have not yet finalized locations or timing.”

Just this week, Intel claimed that it was still committed to constructing the planned manufacturing mega-fab to be located near Magdeburg in eastern Germany, after a spokesperson had previously hinted that the company was delaying the project.

Intel had likewise been assured that it would receive subsidies amounting to about 40 percent of the cost of constructing the Magdeburg site, amounting to about €6.8 billion ($7.2 billion) from the German government, but the estimated construction costs had increased by December of last year, and Intel was reportedly holding out for additional subsidies before committing to the project.

Also this week, it emerged that Intel had cancelled plans for a $200 million development center that was set to be constructed at Haifa in Israel. Intel told The Register the decision had been made with the aim of achieving cost reductions, as the company struggles with financial challenges that include a fall in revenue of nearly 20 percent during 2022.

At Davos, Gelsinger told reporters that while the chip industry was currently entering a downcycle, it was important to continue investment to ensure that Intel would be well-placed to take advantage once the economic situation picks up again.

"Everybody still believes the semiconductor industry doubles this decade, so we have to keep making those long-term investments," Gelsinger said, according to Nikkei Asia. ®

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