European Commission Approves $5.4 Billion Chip Plant Boost in Italy

The European Commission has approved Italian state aid for STMicroelectronics to construct a €5 billion chip plant in Catania, Sicily. Aiming to reduce reliance on Asian imports, the plant will produce energy-efficient silicon carbide chips for electric vehicles. This initiative aligns with Europe’s digital and green transition goals.

The European Commission on Friday approved Italian state aid for STMicroelectronics to build a 5 billion euro ($5.4 billion) chip plant, as Europe battles to reduce its reliance on Asian imports for vital manufacturing components. The plant in Catania, Sicily, will receive a direct grant of about 2 billion euros from Rome to make specialist microchips that boost energy efficiency in electric cars.

Massive supply chain disruptions during the pandemic and a rise in trade tensions with China have heightened scrutiny on Europe's reliance on Asia for chip supplies, with recent disruptions on the Red Sea trade route adding to concerns. With the United States also offering big incentives to try to attract chip manufacturers, the European Union has responded with its own Chips Act seeking to do the same for components vital to hi-tech industries from computing to carmaking.

"The Catania campus will help reverse the tendency of over-reliance on imports of devices that are particularly relevant for the European digital and green transition objectives," the Commission said in a statement. The STMicro plant will produce chips made from silicon carbide, which is more energy-efficient than standard silicon.

The company's plans show its confidence that recent weakness in the electric vehicle market is temporary and that silicon carbide chips will become more widely adopted by automakers. Having a large, integrated European plant making and packaging silicon carbide chips will have "wide positive effects for the European semiconductor ecosystem" and help to guarantee regional security of supply, the Commission said.

The plant is expected to be operating at full capacity in 2032. STMicro is the largest maker of silicon carbide chips, which are more expensive to manufacture than regular silicon chips but favoured by automakers because they are energy-efficient, lightweight and tough.

The company's customers include Tesla, BYD , BMW and Renault. ($1 = 0.9241 euros)