Intel and Italy are intensifying talks over investments expected to be worth around €8bn to build an advanced semiconductor packaging plant, according to two sources close to the matter.

A deal of this size would secure Italy about 10% of the €80bn the US company is looking to spend over the next decade in Europe on cutting-edge manufacturing capacity to help avoid future shortages of semiconductor chips.

It would also deal a blow to Irish hopes that the investment could come here.

Intel CEO, Pat Gelsinger, told RTÉ News earlier this year that Ireland was on the shortlist of countries that could benefit from the company's plan to boost its chip production in Europe by building a number of new fabrication plants.

It was subsequently reported that Intel was looking at a potential site in Galway which could accommodate such a development under the plan.

As part of the plan Germany, the European Union's largest economy, is in the lead to land Intel's planned European 'megafab' plant, although France remains in the running, Reuters reported in October.

Intel declined to comment on the talks or the size of an investment it might make, adding that it has not announced any changes to its plans.

Chipmakers are scrambling to boost output after explosive demand for consumer electronics such as smartphones and computers resulting from the work-from-home trend during the Covid-19 pandemic.

Meanwhile EU countries, where many jobs still rely on industries such as automobile manufacturing, are eager to reduce their dependence on semiconductor supplies from China and the United States after recent supply chain problems.

The proposed Italian factory would be an advanced packaging plant using innovative technologies to weave full chips.

Intel and the Italian government of Prime Minister Mario Draghi are discussing an overall investment of $9 billion over 10 years from when construction begins, the sources said.

Negotiations are complex and Rome wants Intel to clarify its plans for Italy before formalising a package of favourable conditions, especially on jobs and energy costs, they added.

If Rome and Intel clinch a deal, they will then proceed with the choice of a site for the plant, the sources said.

However its CEO Pat Gelsinger earlier this month said he hoped to announce the locations of new chip plants in the United States and Europe early next year.

In April, the Italian government used anti-takeover legislation to block a planned sale of a controlling stake in a local semiconductor equipment maker to China's Shenzhen Invenland Holdings Co. Ltd.