Intel Corp. has reportedly chosen to construct a new, multi-billion dollar chip fab in Germany, with supporting facilities to be built in France and Italy, as part of its plans to expand computer chip production in Europe.

The chipmaker is said to be planning a cutting-edge manufacturing plant in Europe in part to help to solve the supply shortages that have hit numerous industries across the globe. The plans are also part of a drive by Intel to shift more chipmaking to Europe and the U.S., to counterbalance Asian dominance.

Bloomberg cited people familiar with Intel’s negotiations today as saying the company will establish its central wafer fabrication plant in Germany. State-of-the-art chip fabs can cost over $20 billion to build, with the most expensive component being the machinery, which usually becomes obsolete within five years. Bloomberg said the German plant would likely have a price tag within that range.

France will become home to a new chip research and design center, though Intel is yet to decide between sites in Paris and Grenoble. Such facilities usually cost only a small fraction of what’s needed to build a chip factory, Bloomberg said.

As for Italy, the country will host a new test and assembly plant that Bloomberg said could cost up to $10 billion. It would be a big coup for Italy if true, securing the country more than 10% of the $80 billion Intel is looking to spend in Europe over the next decade to add cutting-edge chip manufacturing capacity.

Intel and other chipmakers are scrambling to boost output after being overwhelmed with demand for consumer electronics because of the COVID-19 pandemic. With more people working and staying at home, that led to a big jump in demand for consumer electronics and the chip-making industry has struggled to keep up.

At the same time, the European Union is keen to reduce its dependence on semiconductor supplies from Asia and the U.S. The EU’s vital automobile manufacturing industries have been hit hard by the chip shortage, with many factories sitting idle for a lack of chips.

Bloomberg said Intel is budgeting up to $28 billion in 2022 to build the new plants and support facilities in the EU, even though it expects to receive substantial assistance in the form of government grants. Intel will reportedly use the new plant to manufacture chips for other companies besides itself, rivaling Taiwan Semiconductor Manufacturing Co. Ltd. in the foundry business.

Irish media reports that Intel’s decision would be a major blow for that country, as it had high hopes of winning some of the investment. For its part, Intel reportedly insisted that no final decisions have been made.

“Intel executives are having constructive investment conversations with government leaders in multiple EU countries,” the company said in a statement. “We are encouraged by the many possibilities to support the EU’s digital agenda and 2030 semiconductor ambitions. While current negotiations are ongoing and confidential, we plan to make an announcement as soon as possible.”

Photo: Morton Lin/Flickr