Intel, the renowned U.S. semiconductor giant, has secured a substantial grant of $3.2 billion from the Israeli government to facilitate the construction of a state-of-the-art $25 billion chip manufacturing plant in southern Israel. ‘
This financial commitment is the largest ever made by a company in Israel and exemplifies a notable collaboration between Intel and the Israeli government.
This significant development unfolds against the backdrop of heightened tensions between Israel and the Palestinian militant group Hamas, particularly following the October 7 attack initiated by Hamas on Israel.
Notably, Intel’s investment is seen as a demonstration of support from a major U.S. entity at a time when the U.S. government is urging Israel to implement measures aimed at minimizing civilian harm in Gaza.
Following this announcement, Intel experienced a positive uptick in its shares, opening at $49.28 on Nasdaq with a 2.73% increase.
The company, which houses nearly 10% of its global workforce in Israel, strategically opted to temporarily halt U.S. sales of its latest high-end Series 9 and Ultra 2 models ahead of the Christmas Day deadline.
The proposed expansion of the chip plant is slated to take place in Kiryat Gat, where Intel already operates an existing chip plant approximately 42 km (26 miles) from Hamas-controlled Gaza.
According to Intel, this expansion is integral to the company’s broader strategy of establishing a more resilient global supply chain, aligning with ongoing and planned manufacturing investments in Europe and the United States.
Under the leadership of CEO Pat Gelsinger, Intel has been investing billions in constructing factories across three continents.
They’ve been aiming to regain dominance in chip manufacturing and better compete with industry rivals such as AMD, Nvidia, and Samsung. This new plant in Israel adds to a series of recent investments by Intel.
Daniel Benatar, Intel’s Vice President, underscored the significance of the Israeli government’s support, emphasizing that it ensures Israel remains a global hub for semiconductor technology and talent.
Over the past five decades, Intel has received approximately $2 billion in grants for its various facilities in Israel.
Ofir Yosefi, Deputy Director General of Israel’s Investments Authority, shed light on Intel’s decision-making process, explaining that the company chose a higher grant and tax rate over an alternative offering a lower grant and lower tax rate.
Yosefi emphasized that Israel is poised to reap substantial fiscal and economic benefits from this sizable investment.
Finance Minister Bezalel Smotrich hailed the investment as a contribution to the values of progress for humanity, particularly amid challenges in Israel’s conflict with Hamas.
The investment, spanning five years, involves Intel paying a corporate tax rate of 7.5%, up from the previous 5%, in line with Israeli laws designed to encourage investment in development areas.
Intel’s global investment strategy extends beyond Israel, with plans to spend over 30 billion euros ($33 billion) in Germany to establish two chip-making plants in Magdeburg, supported by substantial subsidies from the German government.
Additionally, in 2022, Intel unveiled a plan to invest up to $100 billion in building a potentially world-leading chip-making complex in Ohio.
In addition to the $3.2 billion grant, Intel has committed to purchasing $16.6 billion worth of goods and services from Israeli suppliers over the next decade.
The construction of the new facility is expected to generate several thousand jobs, further contributing to the region’s economic landscape.
Intel, a presence in Israel since 1974, currently operates four development and production sites in the country, including the manufacturing plant in Kiryat Gat, known as Fab 28.
This facility produces Intel 7 technology, or 10-nanometer chips, and directly employs nearly 12,000 people, with an additional 42,000 employed indirectly.
Intel’s exports from Israel, amounting to around $9 billion, constitute 5.5% of total high-tech exports.
Several groundbreaking technologies, such as the Centrino chip enabling WiFi use and Core processors, were developed in Israel.
Intel’s acquisition of Israeli self-driving auto technologies firm Mobileye for $15.3 billion in 2017 marked a significant move into advanced technologies.
While the specific technology to be produced at the new Fab 38 plant remains undisclosed, construction is reported to have already commenced.
Prime Minister Benjamin Netanyahu had previously announced in June that Intel would construct a new $25 billion chip plant in Israel, with formal confirmation of this investment provided by Intel more recently.
The Fab 38 plant is scheduled to open in 2028 and operate through 2035, emphasizing Intel’s long-term commitment to its operations in Israel.