Italy and Intel are nearing a $5 billion deal for a chip factory

Italy is nearing an agreement with Intel (INTC.O) to develop an advanced semiconductor packaging and assembly factory in the nation, according to two individuals informed on the talks on Thursday.

Intel’s investment in Italy is part of a larger plan announced earlier this year by the US chipmaker to invest $88 billion in building capacity across Europe, with the goal of reducing reliance on Asian chip imports and alleviating a supply crunch that has curtailed output in the region’s strategic car sector.

The sources, who asked not to be identified owing to the delicacy of the topic, said the administration of departing Prime Minister Mario Draghi was aiming to reach a deal by the end of August, ahead of a snap national election slated for Sept. 25.

According to Reuters, Rome is prepared to support up to 40% of Intel’s overall investment in Italy, which is projected to grow over time from the initial $5 billion.

Intel and Draghi’s office both declined to comment.

The facility would weave together entire chips from tiles using innovative technology.

According to the sources, Intel and the government have identified potential locations in two Italian areas, one of which is in the northern regions of Piedmont and Veneto.

According to both sources, a final decision on where to develop the facility has yet to be made. Initially, the areas of Lombardy, Apulia, and Sicily were also considered. The actual extent of Intel’s contribution and how Italy intends to fund its portion remain unknown.

The European Commission said earlier this year that it has made available 15 billion euros in extra public and private investment by 2030 under the so-called Chips Act, which is focused at supporting new semiconductor facilities. This is in addition to the 30 billion euros previously budgeted for public investments through NextGenerationEU, Horizon Europe, and state budgets.

So far, Rome has set aside 4.15 billion euros to recruit chipmakers and invest in new industrial uses of breakthrough technology until 2030. more info

The government is also in negotiations with STMicroelectronics, a French-Italian company, Taiwan chipmakers MEMC Electronic Materials Inc and TSMC (2330.TW), and Israeli Tower Semiconductor (TSEM.TA), which Intel purchased earlier this year.

STMicroelectronics and GlobalFoundries agreed last month to establish a $5.7 billion chip plant in France.