EU approves Italian aid for $5.4 billion STMicro chip plant

The European Commission on Friday approved Italian state aid for STMicroelectronics to build a 5 billion euro ($5.4 billion) microchip plant as Europe battles to reduce reliance on Asian imports for vital manufacturing components.

The French-Italian semiconductor maker's proposed plant in Catania, Sicily, will receive a direct grant of about 2 billion euros from Rome to make specialist microchips that boost energy efficiency in electric cars.

Massive supply chain disruptions during the pandemic and a rise in trade tensions with China have heightened scrutiny on Europe's reliance on Asia for chip supplies, with recent disruptions on the Red Sea trade route adding to concerns.

With the United States also offering big incentives to try to attract chip manufacturers, the European Union has responded with its own Chips Act, seeking to do the same for components vital to hi-tech industries from computing to carmaking.

European Union antitrust chief Margrethe Vestager said the approved state aid demonstrates the bloc's determination to ensure supply of such materials.

"I think it's really important that we do this, because it's also signalling to the rest of the world, you should not build up capacity to think that you can own this market, because it's so strategically important to us not to have single supplier dependencies," Vestager told a press conference in Catania.

U.S. stocks fell on Thursday, led by declines in technology shares after a disappointing Salesforce forecast.

The Italian and French governments are the major shareholders in STMicro, holding a joint stake of 27.51%.

The new plant will be the group's second facility on the Italian island.

"The Catania campus will help reverse the tendency of over-reliance on imports of