Intel plans to build major semiconductors plant in Germany

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Intel plans to build major semiconductors plant in Germany

According to people familiar with negotiations, Intel Corp.'s global push to increase capacity will include adding facilities in France and Italy, as well as putting a major production site in Germany.

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The people who asked not to be identified said that France will be home to a research and design center, and Italy will be the site of a test and assembly factory. According to the people, the main wafer fabrication plant, or fab, will likely be built in Germany. Chief Executive Officer Pat Gelsinger is trying to restore the world's largest chipmaker to its former glory. The spending binge is meant to address the fact that the company has lost its technological edge to rivals and ceded market share. Gelsinger wants to bring more production back to the U.S. and Europe, counterbalancing Asia's manufacturing dominance.

The move would slow down Europe's decline as a manufacturing base in the $400 billion chip industry. The U.S. company has an existing plant in Ireland and there are older former Advanced Micro Devices Inc. processor factories in Dresden, Germany owned by Globalfoundries Inc. European manufacturers don't usually make the kind of advanced logic chips that are regarded as the state of the art in the industry.

NXP Semiconductors NV and STMicroelectronics NV are the two largest chipmakers in the continent. They focus on parts for cars and other equipment rather than the advanced computer processors that are Intel's specialty.

There have been renewed concerns about the concentration of production in Asia due to a global chip shortage. Manufacturers such as Taiwan Semiconductor Manufacturing Co. and South Korea's Samsung Electronics Co. have grown increasingly deft at producing chips, forcing Intel to play catch-up. Gelsinger believes that spreading manufacturing around the world will help avoid the kinds of supply constraints that have plagued whole industries this year, including automakers.

Part of Gelsinger's plan is to build factories that make chips for other companies, directly rivaling TSMC in the so-called foundry business. Intel has only produced chips of its own design until now.

To help fund his ambitions, he called for lawmakers on both sides of the Atlantic to give public money in the form of tax breaks and grants to chipmakers willing to build plants in Europe and the U.S.

By spreading around Intel's spending, Gelsinger may be trying to placate as many EU members as possible to try to make sure that none of them try to object to any central funding that is made available. The plans aren't final yet. The mega-fab will likely be built in Saxony, with German regions Saxony-Anhalt and Bavaria in the running for the new factory.

Thousands of jobs could be brought by Intel's ambitious new ventures. The company is planning to create 4,000 jobs in Malaysia through a $7.1 billion investment in new chip packaging facilities.

Intel is budgeting about $28 billion for new plants and equipment in 2022, up from $18 billion last year, even with the potential government help. The spending plans have jarred investors who worry about the toll on profit. The massive increase in expenditures will only put Intel on course to keep pace with TSMC and Samsung spending.

The shares of Intel, based in Santa Clara, California, have gained just 2.3% this year - even though its peers have enjoyed boom times. The Philadelphia Stock Exchange Semiconductor Index has climbed 39%, with companies such as Nvidia Corp. more than double.

State-of-the-art chip production plants cost more than $20 billion and their most expensive component machinery is usually obsolete within five years. The German plant could have a price tag in that range. The Italian test and assembly plant is expected to cost around $10 billion. One person familiar with the situation said that Sicily was one of the areas under consideration as the intelligence and government officials there are still negotiating on the site.

According to another person, the French R&D center can be built in either Paris or Grenoble. Such facilities can cost only a fraction of the amount needed to build a factory.

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