Intel says Italy still in the game as talks over chip plant continue

MILAN (Reuters) -Italy remains a potential location for Intel to build a new European chip plant, the U.S. chipmaker told Reuters on Friday, having set out last March a plan to boost production in Europe.

Intel said at that time it would build a plant in Italy as part of its programme to invest as much as 80 billion euros ($87 billion) in Europe over the next decade, centred on a mega chip manufacturing complex in Magdeburg, Germany.

The Italian project would be an advanced packaging and assembly plant, using new technologies to weave together full chips out of tiles.

"We continue to progress our discussions with Italy regarding a state-of-the-art back-end manufacturing facility," Intel said in a statement to Reuters, adding it remained "excited about the project".

Intel CEO Pat Gelsinger had seemed to suggest a possible setback for Rome in an interview with daily Il Corriere della Sera published on Friday, saying Italy was only one of several potential countries being considered and that a decision should be reached by the end of this year.

"Italy is still in play, but so are other candidate countries... We will decide within the year," Gelsinger was quoted as saying, adding that he spoke with Italy's Prime Minister Giorgia Meloni on Tuesday.

Sources have previously said Mario Draghi, Meloni's predecessor, had detailed a comprehensive agreement with Intel in early September to build the plant, with the town of Vigasio near Verona, in the northern Veneto region as the preferred spot.

However, the deal was never finalised by the new right-wing administration, which took office in October.

Intel said on Friday talks with Italy were "in addition" to other projects that the group was considering in other parts of the world, where decisions about locations and timings were not yet finalised.

Meloni said in December that she considered an investment by Intel in Italy as highly strategic and would meet with the company to explore ways to facilitate it.

An official in Meloni's administration told Reuters this month that Intel had started an in-depth assessment of planned investments in Germany, France and Italy.

The official said Rome was concerned, however, that massive subsidies being laid out by the U.S. administration to support key industries could discourage Intel from investing in Italy.

President Joe Biden plans to support semiconductor production and research with $52.7 billion in subsidies as the United States strives to keep up with China's science and technology efforts.

Italy also fears generous U.S. tax breaks for domestic production of energy sector components could give Intel a further reason to invest on its home turf, the official said.

Economy Minister Giancarlo Giorgetti said on Wednesday the government was determined to secure Intel's investment.

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(Reporting by Supantha Mukherjee in Stockholm, Giuseppe Fonte in Rome and Alessia Pe in Milan; editing by Gavin Jones, John Stonestreet and Elaine Hardcastle)