The European Commission on Friday approved Italian state aid for STMicroelectronics to build a 5 billion euro ($5.4 billion) microchip plant as Europe battles to reduce reliance on Asian imports for vital manufacturing components.
The French-Italian semiconductor maker’s proposed 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.
European Union antitrust chief Margrethe Vestager said the approved state aid demonstrates the bloc’s determination to ensure supply of such materials.
“I think it’s really important that we do this, because it’s also signalling to the rest of the world, you should not build up capacity to think that you can own this market, because it’s so strategically important to us not to have single supplier dependencies,” Vestager told a press conference in Catania.
The Italian and French governments are the major shareholders in STMicro, holding a joint stake of 27.51%.
The new plant will be the group’s second facility on the Italian island.
“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.
(Reporting by Toby Sterling; Additional reporting by Diana Mandia and Tassilo HummelEditing by David Goodman and Mark Potter)
