Italy: EU Commission approves €2bn state aid for STMicroelectronics semiconductor manufacturing

The European Commission has approved, under EU State aid rules, a €2 billion Italian measure to support STMicroelectronics (‘ST’) in the construction and operation of an integrated chip manufacturing plant for Silicon Carbide (‘SiC’) power devices in Catania, Sicily. The measure will strengthen Europe’s security of supply, resilience and digital sovereignty in semiconductor technologies, in line with the objectives set out in the European Chips Act Communication. The measure will also contribute to achieving the digital and green transitions.

The Italian measure

Italy notified the Commission of its plan to support ST’s Catania Campus project to build and operate an integrated chip manufacturing plant for SiC power devices. SiC is a compound material used to manufacture wafers that serve as a base for specific microchips used in high-performance power devices, such as in electric vehicles, fast-charging stations, renewable energies and other industrial applications. The integrated plant will cover all the manufacturing steps from the raw material to the finished devices, namely power transistors and power modules.

The aid will take the form of an approximately €2 billion direct grant to ST to support its investment worth €5 billion in total. The project will enable the development of a large-scale manufacturing facility for high performance SiC chips, based on 200mm diameter wafers that will be processed into modules and other devices used for instance by the automotive industry, in Europe and globally. The facility is planned to be operating at full capacity in 2032.

Under the measure, ST agreed to:

1. ensure that the project will have a clear positive impact with spill-over effects on the EU semiconductor value chain beyond ST and Italy;
2. contribute to the development of the next generation of the 200 mm SiC technology, as well as to a technology roadmap for SiC modules in the EU;
3. implement priority rated orders in the case of a supply shortage in line with the European Chips Act and ensure that the project will not be subject to the extraterritorial application of public service obligations imposed by a third country; and
4. develop and deploy educational and skills trainings to increase the pool of qualified and skilled workforce.

The project builds on technologies that have been and will be developed as part of the Important Projects of Common European Interest (“IPCEIs”) for research and innovation in microelectronics approved by the Commission in December 2018 and in June 2023. On 4 March 2024, ST applied for the recognition of the Catania Campus as an integrated production facility under the European Chips Act. This process is independent from the State aid assessment.

The Commission’s assessment

The Commission assessed the Italian measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to grant aid to facilitate the development of certain economic activities subject to certain conditions, and based on the principles set out in the European Chips Act Communication.

The Commission found that:

• The measure facilitates the development of certain economic activities, by enabling the establishment of a new mass-production facility for innovative technologies and chips in Europe.
• The facility is first-of-a-kind in Europe, as there currently is no comparable mass-production facility. In particular, the Catania Campus will be the first integrated SiC manufacturing facility in Europe covering all production steps from powder material to finished devices, including SiC module manufacturing. The Catania Campus will also use a manufacturing process based on 200mm-diameter wafers for SiC and will derive significant efficiency gains from the tight manufacturing integration within the Campus.
• The aid has an ‘incentive effect’, as the beneficiary would not carry out this investment without public support.
• The measure has a limited impact on competition and trade within the EU. The measure is necessary and appropriate to ensure the resilience of Europe’s semiconductor supply chain. In addition, the aid is proportionate and limited to the minimum necessary based on a proven funding gap (i.e. the aid amount necessary to attract the investment that otherwise would not take place). Finally, ST has agreed to share potential profits beyond current expectations with Italy.
• The measure has wide positive effects for the European semiconductor ecosystem and contributes to strengthening Europe’s security of supply, in particular by setting up an integrated facility that covers all SiC manufacturing steps and by committing to comply with priority rated orders to produce crisis-relevant products in Europe. The Catania Campus will help reverse the tendency of overreliance on imports of devices that are particularly relevant for the European digital and green transition objectives. The project will boost research and development, and collaboration with academia and suppliers active in SiC technology. Finally, the project will help develop a highly skilled workforce, as well as contribute to overall cohesion goals by developing an economic activity in Sicily, an area eligible for regional aid under Article 107(3)(a) TFEU.

On this basis, the Commission approved the Italian measure under EU State aid rules.

Background

On 8 February 2022, the Commission adopted the European Chips Act Communication. It is part of a comprehensive Chips Act package, which also included the European Chips Act that entered into force on 21 September 2023.

In the European Chips Act Communication, the Commission recalled that investments in new advanced production facilities in the semiconductor sector are important to safeguard the EU’s security of supply and supply chain resilience, while generating significant positive impacts to the wider economy. The Commission recognised in that Communication also a number of factors relevant for a case-by-case assessment directly under Article 107(3)(c) TFEU.

Today’s approval is the third decision by the Commission based on these principles. On 5 October 2022, the Commission approved, under EU State aid rules, an  Italian measure to support ST in the construction and operation of a SiC wafer plant in Catania using 150mm technology. In addition, on 27 April 2023, the Commission approved a €2.9 billion French aid measure to support ST and GlobalFoundries in the construction and operation of a new microchips manufacturing facility in France.

The non-confidential version of the decision will be made available under the case number SA.107594 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

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