The chip war is also being fought in Italy: why Intel is hesitant about the super factory | Whatever it takes by Federico Fubini

Athens or Rome in antiquity went to war to subjugate populations and conquer new slaves. Even the superpowers of the contemporary world have slaves and are willing to go to (economic) war to control them. These slaves do not speak, cannot be seen, are between two and thirty billionths of a meter in size and are installed in household appliances, cars, smartphones, personal computers or missiles. They are semiconductors.

This year they will be sold worldwide for 639 billion dollars, 7% more than a year ago.

let’s keep it in mind, because Italy and Europe are a terrain of world conflict for power over these strategic means of our time. I am these days.

In Italy, in the next two weeks we are playing for the largest technological investment in the history of the republic and at least five thousand super-qualified jobs. But, as often happens with essential things, in our country we talk little about them.

Why now? For two related reasonsin a common thread that unites decisions made or to be made in the United States, in Europe and in Rome. The first reason that concentrates the tension in recent weeks is that the third “Trade and Technology Council” was held last Monday in Washington, the meeting of dignitaries from the American administration and the European Union to discuss the trade disagreements between the two (in the photo above, the meeting: from left, US Commerce Secretary Gina Raimondo, Secretary of State Antony Blinken, Trade Representative Katherine Tai, European Commission Vice-President Valdis Dombrovskis and EU Competition Commissioner Magrethe Vestager). I have recounted several times in this newsletter and in the “Corriere” the widespread concern in Europe for the maxi-subsidies worth hundreds of billions of dollars offered by Joe Biden’s White House to the most advanced industry in the United States. There is enough to create a massive migration of manufacturing investment from one side of the Atlantic to the other.

US subsidies for semiconductor manufacturing

Among the subsidies there are also – approved last July – 52 billion dollars in direct aid for research and production of semiconductors and 24 billion in tax credits for their manufacturing. America has an engineering edge in the design of chips and chip-making machines, even though the Taiwan Semiconductor Manufacturing Company (TSMC) of Taipei controls 28% of the world’s manufacturing capacity. The American nightmare today of losing this advantage, especially in favor of China which is investing more in the development of semiconductors than in any other sector (on this advice the brilliant book by Chris Miller “Chip War”, Simon & Schuster, 2022).

Europe squeezed between the US and China

The effect of this new, founded American neurosis that the week-long summit for Europeans was bittersweet. Brussels negotiators managed to exempt European suppliers of batteries and strategic materials from some of the protectionist barriers raised by Biden, but at a high price: the Americans want to enlist us in their technological war against China. Last October Biden had a rule approved (the “Foreign Direct Product Rule”) which imposes very harsh restrictions on China’s access to semiconductors manufactured and designed in the United States or simply produced with machinery made or invented in the United States. Since America is the world champion of the latter, the “Foreign Direct Product Rule” is essentially a preventive sanction against Beijing. It prevents China from accessing the most advanced semiconductors and related technologies. pure geopolitics made with the weapons of commerce: typical face of this globalization 2.0no longer guided by the markets but by governments on the basis of their priorities.

(Below the first episode of the Invisible Geniuses series, Massimo Sideri’s podcast on Italian inventions)

America’s request: no chips (and products) to China

All this crosses the destinies of Europe and Italy, because at last Monday’s summit the Americans presented a request: their semiconductors (or those made thanks to their intellectual property) cannot be mounted on European products that we Europeans sell in China. a draconian condition. Car giants such as Daimler, Audi, BMW mount at least a hundred chips from Nvidia, a large American semiconductor manufacturer, on each of their models. But for German cars, China is the first market, with a turnover of around 19 billion dollars a year. To give it up would be enormous damage. And many companies in Italy live off supplies to the big German brands, the same ones they then export to the People’s Republic. So the damage would come very soon also from this part of the Alps.

European factories?

Even so, this globalization 2.0 sees us as passive subjects, although the stakes for us are very high. One solution would be to build an autonomous European capacity to design and produce our semiconductors in sufficient quantities. But, despite the efforts of the Italian-French Stm or the German Infineon, we are very far from it. The best that can happen is whatIntel, the American technology giant, announced last March: a maxi-investment to locate the production of semiconductors in Italy, Germany and Franceeven the most advanced from two nanometers (two billionths of a metre), for the needs of European industry.

Intel’s project in Europe (and in Italy)

Intel’s project started in full swing between March and May last year. Provides a investment of around 20 billion euros in a chip factory in Magdeburg, in Germany. A investment of around 15 billion euros in France for research and development in the field of the most advanced chips. It’s a investment of about ten billion in Italy (on ballot the Piedmontese Chivasso and Vigasio in the province of Verona) in the so-called “back end”: placing the microscopic transistors on a silicon or nitrate substrate, in a very thin sheet (“wafer”) which is then cut by a laser for the so-called final “packaging” of the chip to be installed in a car or in a smartphone. For Italy it would be a literally revolutionary foreign investment: the first time that Intel puts its new “back-end” technology into production, never seen before in the world. It means work of the highest level for thousands of engineers and specialists, the birth of a new district, the message to the world that Italy too can become a destination for foreign direct investments of this type.

To ensure the objective Mario Draghi, when he was at Palazzo Chigi, had spoken several times with the CEO of Intel Pat Gelsinger. Vittorio Colao, as Draghi’s Minister of Innovation, had established a very close personal relationship with him. European collaboration was also working: the European Chips Act liberalizes state aid and allows Italy, France and Germany to each finance about 40% of Intel’s investment (which without these subsidies would have remained in the United States).

Between Piedmont and Veneto

The Americans seemed to be in a hurry. In recent months Gelsinger has sent i its teams in Chivasso and Vigasio for any type of analysis: proximity to good polytechnic institutes and engineering schools (both good), soil surveys on seismic risk and landslides, even analysis of migratory bird routes. Intel is committed to deciding the site of the plant – between Piedmont and Veneto – within this month, but suddenly he doesn’t seem to be in a hurry anymore. He says that first he wants to do more tests on his new technology. French investment also appears to have stalled. Only the construction of the chip factory in Germany for the German auto industry is progressing apace.

An intervention by the Italian side would be needed, which would give new guarantees to Gelsinger and oblige him to keep his commitment. Yes, but an intervention by whom? The team of the Ministry of Enterprise (formerly Development) to negotiate with Intel has only now just been reconfirmed, after a month and a half in government. Minister Adolfo Urso does not speak English – so I am told – so he is struggling to establish the close relationship with Gelsinger that would be needed. But Giorgia Meloni speaks English and should use it. ASAP. Let’s try not to miss this train: we would remain flat while globalization 2.0 picks up speed.

This article was originally published in the Whatever it Takes newsletter edited by Federico Fubini (do not hesitate to write me: comments or questions, disputes and proposals).

Sign up for Federico Fubini’s “Whatever it Takes” newsletter. Data, facts and strong opinions: this week’s challenges for the economy and markets in an unstable world. Every Monday in your inbox.

And don’t forget the newsletter L’Economia Opinioni”

and “The Economy 6 PM”.