By Adria Calatayud and Mauro Orru


STMicroelectronics is planning a new chip-manufacturing plant in Italy for an investment of around 5 billion euros ($5.42 billion) that will come with some state support, as the chip maker jockeys for position in the semiconductor market's recovery.

The group, which counts Apple, Tesla and Samsung Electronics among its customers, said the new facility in Catania, Sicily, would produce silicon-carbide semiconductor products for power devices and modules.

Silicon-carbide chips are more resistant and energy-efficient than traditional ones, and are a key growth driver for semiconductor manufacturers since they are rapidly becoming mainstream in electric vehicles and data centers.

STMicroelectronics already makes some silicon-carbide products in Catania, where it has had a presence since 1962. The new investment shows that the company is seeking to expand production capacity as analysts expect a recovery in the semiconductor market.

STMicroelectronics and the wider chip industry have been grappling for months with low demand for their semiconductors in consumer devices as manufacturers of smartphones and computers held off ordering more chips that they had stockpiled in recent years.

The automotive industry, which long provided a lifeline to the sector as car makers sought smaller and more energy-efficient chips in their push for electric vehicles, wasn't spared by the slowdown either.

In April, Elon Musk's electric-vehicle maker Tesla reported its first year-over-year decline in quarterly deliveries since 2020, a sign that the EV market is slowing and translating into fewer orders for chip makers.

STMicroelectronics recently lowered its sales and margin forecasts for the year after posting revenue below analysts' expectations for the first quarter. German rival Infineon Technologies also cut its sales and margin guidance for the fiscal year to the end of September.

The roughly EUR5 billion investment earmarked for the plant includes about EUR2 billion in state support from Italy, after European Union antitrust authorities approved the package in the form of a direct grant.

The European Commission--the EU's executive arm and antitrust enforcer--said the state aid is needed to support Europe's semiconductor supply chain as the bloc seeks to become more self-sufficient in chip production while the U.S. woos investors with generous subsidies.

The Biden administration is handing out billions of dollars to companies, such as Taiwan Semiconductor Manufacturing Co., Intel and Samsung, willing to invest in chip-making facilities in the U.S. in a move aimed at reviving hardware manufacturing in the country.

STMicroelectronics' new plant in Sicily is the latest big-ticket investment in Europe. On Thursday, Infineon received a building permit for the final construction phase of a new plant in Germany, with an investment of EUR5 billion.

Last year, TSMC and Intel set out plans to pour tens of billions of dollars into building chip-making facilities in Germany.

STMicroelectronics said its new facility in Catania should start production in 2026, with full capacity expected by 2033.


Write to Adria Calatayud at adria.calatayud@wsj.com and Mauro Orru at mauro.orru@wsj.com


(END) Dow Jones Newswires

05-31-24 0512ET