STMicro, GlobalFoundries plan new $5.7 billion French chip factory

By Sudip Kar-Gupta and Supantha Mukherjee

PARIS/STOCKHOLM (Reuters) -Chipmakers STMicroelectronics and GlobalFoundries announced plans on Monday to build a semiconductor factory in France, drawing on funding from the government, in the latest move to boost output in the region.

The project represents the lion's share of 6.7 billion euros ($6.8 billion) of investment from major global companies that President Emmanuel Macron is due to announce at this year's Choose France summit in Versailles.

The United States and the European Union have been pushing for home-grown chip factories by offering billions in state subsidies to cut dependency on Asian suppliers and ease a global chip shortage which has created havoc for carmakers, though there are signs demand is waning.

This facility, which will be next to STM's existing plant in Crolles, is targeted to reach full capacity by 2026, with up to 620,000 wafers per year of production at a size of 18-nanometers, the statement said.

Those are used in automotive, internet-of-things and mobile applications.

The companies did not disclose the amount of investment at the new site near the Italian and Swiss borders or how much funding the French state would provide.

French presidential advisers said they could not disclose the subsidy amount as they hoped there would be money from the European Commission as part of the Chips Act, the budget for which has yet to be negotiated.

In a call with journalists, the companies said the investment - which Macron's office said amounted to more than 5.7 billion euros - would be challenging without participation from the French government. Macron will visit the factory site, his office said

Spokespeople for GlobalFoundries and STMicro declined to comment.

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The new factory would create around 1,000 new jobs and also help STMicro reach its target to boost revenue to above $20 billion.

"We will have more capacity to support our European and global customers as they transition to digitalisation and decarbonisation," STMicroelectronics CEO Jean-Marc Chery said.

While STMicro had earlier disclosed plans to double its investments this year to up to $3.6 billion, GlobalFoundries has been expanding in the U.S., Germany and Singapore.

The European Commission earlier this year eased funding rules for innovative semiconductor plants as part of the European Chips Act as the bloc seeks to double its global market share to 20% in 2030.

In March, Intel laid out plans for a $88 billion investment across Europe and picked Germany as the site for a huge new chipmaking complex. In France, it plans to build its new European research hub, creating 1,000 new high-tech jobs.

Intel's site will make the latest 2-nanometer chips, which are comparatively newer than the STM-GlobalFoundries project.

Asian chipmakers such as TSMC and Samsung have also laid out big investment plans but so far have not announced any semiconductor factories in Europe.

Chipmakers have seen huge demand since late 2020 as higher orders from electronics manufacturers boosted by work-from-home practices fuelled a surge in sales of gadgets and led to supply crunches for other industries such as autos and telecom suppliers.

However, the chip shortage may turn into a glut. A significantly weaker-than-expected business outlook by memory-chip firm Micron Technology Inc at the end of June raised concern that the industry was now turning toward a down cycle.

Gartner and other research firms have said that PC and smartphone sales will fall later this year, easing the shortage of chips for other industries.

($1 = 0.9862 euros)

(Reporting by Supantha Mukherjee in Stockholm, Sudip Kar-Gupta and Michel Rose in Paris; Editing by Silvia Aloisi and Bernadette Baum)