German state of Bavaria in talks with Intel on chip megafactory

Germany’s southern state of Bavaria is in talks with Intel (INTC.O) to build a European chip factory in a bid to counter supply bottlenecks that have hampered production in the automotive sector, the local economy minister said on Friday.

In recent months, the U.S. chipmaker has been seeking 8 billion euros ($9.5 billion) in public subsidies to build a semiconductor manufacturing site in Europe.

“I strongly support this,” said Economy Minister Hubert Aiwanger, whose state is home to luxury carmaker BMW (BMWG.DE). “The possible location of a large international semiconductor manufacturer in Bavaria is an outstanding opportunity.”

Bavaria has suggested a disused air base in Penzing-Landsberg, west of Munich as a possible location for the factory, Aiwanger said.

A shortage of semiconductors is causing headwinds for Europe’s car manufacturers and threatens to de-rail Germany’s economic recovery from the coronavirus pandemic.

The European Union is considering creating a semiconductor alliance including STMicroelectronics, NXP, Infineon and ASML to cut dependence on foreign chipmakers during a global supply chain crunch.