STMicro and GlobalFoundries to build chip factory in EU tech independence push

STMicroelectronics and GlobalFoundries are teaming up to build a semiconductor manufacturing factory in France, a multibillion-euro project that will receive significant government support as part of Europe’s effort to boost its independence in critical technologies.

The Élysée Palace said the joint investment from the Switzerland and US-based companies would be worth €5.7bn, but declined to specify how much public money would be allocated since details were still being finalised.

President Emmanuel Macron will visit the STMicroelectronics site where the factory will be built in south-eastern France near Grenoble on Tuesday.

“This is the biggest industrial investment in recent decades outside of the nuclear sector and a big step for our industrial sovereignty,” said French finance minister Bruno Le Maire.

The project is the second foundry to benefit from the EU’s Chips Act, a €43bn plan to subsidise production in the bloc with the aim of securing supplies of the semiconductors that drive the global economy while also attempting to catch up in cutting-edge smaller chips that are made almost exclusively in Asia.

In March, Intel announced plans to build a €17bn foundry in Magdeburg, Germany, as well as other investments in Europe. The company is expected to get billions in state and EU subsidies to produce the miniaturised chips that are usually used for high-performance computing devices, servers and smartphones.

The STMicroelectronics and GlobalFoundries facility will make chips of different sizes down to 18 nanometres that are used in automobiles, factories and appliances. Such chips more closely match the needs of European industry, since few electronics or computing manufacturers are based in the region.

In a joint statement, the companies said they “will receive significant financial support from the state of France for the new facility”, which aims to be at full capacity by 2026. About 1,000 jobs will be created at STMicro’s site in Crolles, up from 6,000 now, and the manufacturing capacity will increase from 10,000 wafers a week to 22,000.

France and Italy are the biggest shareholders in STMicroelectronics, with each holding a 13.75 per cent stake in the company with a market capitalisation of €28bn. GlobalFoundries is a semiconductor contract manufacturer with a market capitalisation of $24bn.

The announcement comes amid a global supply crunch in semiconductors that has dragged on during the coronavirus pandemic, hampering manufacturing output for companies including Infineon and STMicroelectronics that supply Europe’s automotive industry and leading to temporary factory shutdowns at Stellantis and Renault, among others.

Industry executives have said the bottlenecks will persist into 2023 and 2024 or longer, in part because of shortages of the machines needed to make chips and how long it takes to build factories.

The crisis has prompted European leaders to seek to avoid being overly reliant on chip production from Asia, such as industry leader Taiwan Semiconductor Manufacturing Co.

The Chips Act being championed by Brussels is intended as an important step in the EU’s broader “strategic autonomy” agenda, a drive to reduce the continent’s vulnerability to supply chain disruptions and geopolitical risks.

Asked how much the government support had affected the companies’ choice of where to build the plant, the chief executive of GlobalFoundries Thomas Caufield said: “without the French participation, these investments would be very challenging.” 

The US is working on a similar programme to plough up to $52bn into subsidies for chip manufacturing under its own Chips Act, but the law has not been financed by Congress.