Italy is ready to fund as much as 40 percent of Intel's total investment to build a chip packaging and assembly plant in the country, worth an initial $5 billion -- an amount that is expected to rise over time, two sources familiar with the matter said.
The plan by Prime Minister Mario Draghi's government shows the willingness of some European member states to offer competitive terms to woo Intel and other chipmakers to invest in a region where labor and production costs are higher than in Asia.
Draghi's office and the innovation ministry both declined to comment.
Intel recently outlined the first details of an $88 billion investment drive across Europe, which is striving to cut its reliance on Asian chips and ease a supply crunch that has curbed output in the region's strategic car sector.
The plan, with an initial expenditure of 33 billion euros ($36.4 billion), is centered on a huge new chipmaking complex in Germany, and it includes an advanced packaging and assembly site in Italy with a potential investment of up to 4.5 billion euros.
The Italian facility, which is expected to start operations between 2025 and 2027, would create about 1,500 direct jobs and an additional 3,500 jobs among suppliers and partners.
Offering 40 percent of Intel's total capex in Italy would make it competitive with similar investments the chipmaker has made in other regions such as Asia, the two sources said, declining to be identified due to the confidentiality of the matter.
The government is in talks with the EU, which will have to approve state aid offered by member states to Intel, one of the sources said.
"It will be for Brussels to eventually decide how much, but I think Italy will contribute 30-40 percent of the total investment, probably something closer to 40 percent," the source added.
Intel declined to comment on the specifics of the deal, but reiterated that it, along with Italy, aims to make its planned facility a first of its kind in the EU.
Leveling the field
It is not yet clear how Italy plans to provide the funding. Rome has so far set aside 4.15 billion euros until 2030 to attract chipmakers and invest in new industrial applications of innovative technologies.
To clinch a deal with Intel, it is relying on new funding rules for innovative semiconductor facilities announced last month by the European Commission under the so-called Chips Act.
Brussels has made available 15 billion euros in additional public and private investment by 2030, on top of 30 billion euros of public investments already planned from NextGenerationEU, Horizon Europe and national budgets.
Intel Chief Executive Pat Gelsinger has said the EU could help level the cost playing field with Asia, but he declined to give more details.
Gelsinger said that Intel wanted to spend the remaining money from its planned 80-billion-euro investment over the next 10 years to build out the complete German site and further develop facilities in other countries including Italy.
"The government aims to convince Intel to even double its investment in Italy over time, from the initial 4.5 billion euros," the source said.
The source added that Rome had identified five potential sites in Italy where Intel could build its new advanced packaging and assembly facility, in the Lombardy, Piedmont, Veneto, Apulia and Sicily regions.
"The aim is to have a shortlist with two potential alternatives within a month," the source said. "Then it will be (for) Intel to decide where to build it".