Economy Minister Nadia Calvino said 9.3 billion euros will fund the building of plant.
The cash that comes out of European Union pandemic relief funds is directed towards the digital economy and demand created by chip shortages.
It was originally set at 11 billion euros when announced by Prime Minister Pedro Sanchez last month.
Economy Minister Calvino said the aim is to comprehensively develop the design and production capacities of the Spanish microelectronics and semi-conductor industry, covering the entire value chain from design to chip manufacturing.
The plan will finance domestic semiconductor production capacity in leading-edge (below 5 nanometers) and mid-range (above 5 nanometers) semiconductor manufacturing with a 9.3 billion euro investment, the government said.
It will fund research and development with a 1.1 billion euro subsidy and 1.3 billion euros will be allocated to chip design. It will also support Spanish companies in strategic projects developed at the European level and will create a 200 million
Chip Fund to finance start-ups and scale-ups in the Spanish semiconductor sector.