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The southern state of Bavaria, in Germany, is in talks with Intel, to build a large European chip factory, to deal with supply bottlenecks that have crippled production in the automotive industry. The news came from the local economy minister on Friday.

In recent months, Intel has been seeking 8 billion euros ($9.5 billion) in public subsidies, to build a massive semiconductor factory in Europe. Economy Minister, Hubert Alwanger, whose state is home to luxury automaker BMW, said that he strongly supports the plan.

The global semiconductor shortage

Alwanger added that the possible location of a large international semiconductor manufacturer in Bavaria is an exceptional opportunity. Bavaria has suggested turning a disused airbase in Penzing-Landsberg, west of Munich, into the planned factory.

The global semiconductor shortage is causing problems for Europe’s automotive industry and is threatening Germany’s road to economic recovery, after a particularly long and brutal pandemic that is still ongoing. The European Union is considering the creation of an alliance, with semiconductors at the center. It includes STMicroelectronics, ASML, Infineon, and NXP, to cut dependence on foreign chipmakers.

The plan to ease the global supply chain crunch

The EU is ready to commit significant funds to expand the semiconductor industry in Europe. The plan to create an alliance is similar to efforts being undertaken in South Korea, China, and the US, to support chipmakers. The hope is that the EU can attract the biggest chipmakers in the world (Taiwan Semiconductor, Samsung, or Intel) to build a factory in the bloc and help with the effort to ease the shortage.

Funding in the EU could come from several EU programs, like its 800 billion euro coronavirus recovery fund, of which 20% has been allocated to the bloc’s ‘digital transition.’