Intel expands in France, Germany and Italy in return

(Bloomberg) — Intel’s global push to increase capacity will include adding facilities in France and Italy, as well as positioning a major production site in Germany, according to people familiar with the negotiations.

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France will be home to a research and design center, and Italy will be the site of a testing and assembly plant, according to the people, who asked not to be identified because the plan has not been made public. The main wafer manufacturing plant is likely to be built in Germany, according to people. Altogether, the expansion will cost tens of billions of dollars.

CEO Pat Gelsinger is trying to return the world’s largest chip maker to its former glory. The company has lost its technological edge over competitors and ceded market share – something that is supposed to address binge-spending. Gelsinger also wants to bring more production back to the United States and Europe, balancing manufacturing dominance in Asia.

Read more: Intel apologizes to China customers over Xinjiang’s position

Representatives of the French, German and Italian governments declined to comment, as did Intel spokespeople in Europe and the United States

For Europe, the move will slow its decline as a manufacturing base in the $400 billion chip industry. The American company has a plant based in Ireland, and there are older, former processor plants of Advanced Micro Devices Inc. It is owned by Globalfoundries Inc. in Dresden, Germany. But European manufacturers don’t usually make the kind of advanced logic chips that are state-of-the-art.

NXP Semiconductors NV and STMicroelectronics NV are the continent’s two largest domestic chipmakers. They focus on auto parts and other equipment – rather than the advanced computer processors that Intel specializes in.

The global shortage of chips also renewed concerns about the concentration of production in Asia. Manufacturers such as Taiwan Semiconductor Manufacturing Co. have grown. And South Korea’s Samsung Electronics Co. is increasingly adept at producing chips, forcing Intel to catch up. Gelsinger argued that spreading manufacturing around the world would help avoid the kinds of supply restrictions that have crippled entire industries this year, including automakers.

Part of Gelsinger’s plan is to build factories that produce chips for other companies, which TSMC directly compete in in the so-called plumbing business. So far, Intel usually only makes chips of its own design.

To help fund his ambitions, lawmakers on both sides of the Atlantic have called for public funds in the form of tax breaks and grants to chipmakers willing to build factories in Europe and the United States.

By spreading around Intel’s spending, Gelsinger may try to placate as many EU members as possible to try to make sure none of them try to veto any central funding being made available. But the plans are not final yet. The mega plant is likely to be built in Saxony, with the German regions of Saxony-Anhalt and Bavaria also in operation for the new plant.

Intel’s ambitious new projects could create thousands of jobs. The company also plans to create 4,000 jobs in Malaysia with a $7.1 billion investment in new foil packaging facilities.

Intel shares were up 1.2% in early trading Thursday.

Even with potential government assistance, Intel is allocating up to $28 billion for new plants and equipment in 2022, up from about $18 billion this year. The spending plans have irritated investors, who are concerned about profit losses. But the massive increase in expenditures will only put Intel on track to keep up with TSMC and Samsung’s spending.

Shares of Intel, headquartered in Santa Clara, California, have gained just 2.3% this year — even as its peers are enjoying boom times. The Philadelphia Stock Exchange’s semiconductor index rose 39%, with companies like Nvidia Corp more than doubling.

Modern chip production plants cost more than $20 billion, and their most expensive component — machinery — usually becomes obsolete within five years. The German manufacturer can have a price in this range. Meanwhile, the Italian test and assembly plant will cost about $10 billion. Intel and government officials there are still negotiating the location, with Sicily being one region under consideration, according to a person familiar with the situation.

According to another person, the French R&D center may be built in Paris or Grenoble. Such facilities usually cost a fraction of the amount required to build a plant.

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