Intel Corp. and the Italian government are reportedly close to signing a deal that would see the chipmaker build a new multibillion-dollar chip plant in Italy.

The news was reported today by Reuters, which attributed the information to two sources familiar with the matter.

The deal is expected to be worth $5 billion initially. According to the sources, the Italian government is prepared to fund up to 40% of Intel’s investment in Italy. The total value of the project is expected to increase beyond the initial $5 billion price tag over time.

The planned chip plant would focus on chip packaging and assembly. In particular, the facility is reportedly set to produce processors based on chiplet technology. The technology makes it possible to assemble a processor from multiple semiconductor tiles that are manufactured separately.

Modern processors often include multiple types of computing modules. One module might be optimized for general computing tasks, while another may focus on running artificial intelligence software. The usual approach to making a processor with multiple types of computing modules is to manufacture it as a single piece of silicon.

Integrating a processor’s modules into a single piece of silicon creates certain challenges. If one of the modules contains a flaw, the entire processor must be discarded. The chiplet technology that Intel will reportedly use at the planned Italian chip plant makes it easier to address semiconductor manufacturing flaws.

With the chiplet approach, the different computing modules that comprise a processor are not manufactured at once on a single piece of silicon but rather produced separately. If one of the modules contains a flaw, the other modules can still be used. The result is that the entire processor doesn’t have to be discarded if one of its components is manufactured incorrectly.

The shortlisted sites where Intel is considering building the proposed chip plant are reportedly located in the northern Italian regions of Piedmont and Veneto. According to Reuters, the Italian government is seeking to have an agreement ready by the end of the month.

Intel intends to significantly expand its chip manufacturing capacity in the European Union as part of a 33 billion euro investment plan that it detailed earlier this year. Besides a new plant in Italy, Intel is also preparing to build two chip fabs in Germany at an estimated cost of 17 billion euros. The company will additionally establish a product development center France.

Intel is in parallel building two cutting-edge chip fabs in Arizona that are expected to cost $20 billion. Furthermore, the company plans to build two additional fabs at a “megasite” in Ohio that could eventually host eight semiconductor production facilities. According to Intel, its total investment in the Ohio campus has the potential to reach $100 billion over the next decade. 

Image: Intel