The Israeli government has agreed to give US company Intel a $3.2 billion grant to establish a new $25 billion chip factory it plans to build in southern Israel, the two sides said Tuesday, marking the largest investment ever by a company in Israel, according to a Reuters report.
This news comes at a time when Israel is still engaged in its war on Gaza since Hamas launched its Al-Aqsa Flood operation on October 7.
Intel’s intention to establish the aforementioned chip factory with a value of 25 billion is considered a generous offer by a major American company and is in the interest of the Israeli government at a time when Washington has increased pressure on Israel to take further steps to reduce civilian damage in Gaza.
Shares of Intel, which has just under 10% of its global workforce in Israel, opened 2.73% higher at $49.28 on the Nasdaq Stock Exchange.
The expansion plan is for its location in Kiryat Gat, which has a chip factory, 42 kilometers from the Hamas-controlled Gaza Strip. “An important part of Intel’s efforts to promote a more resilient global supply chain, along with the company’s ongoing efforts to attract investments from Europe and the United States.”
Under the leadership of CEO Pat Gelsinger, Intel has invested billions of dollars in building factories on three continents to regain its dominance in the chip industry and better compete with rivals AMD, NVIDIA and Samsung. The new Israeli factory is the latest investment by the American chip manufacturer in recent years.
“Support from the Israeli government will ensure that Israel remains a global hub for semiconductor technology and talent,” Intel Vice President Daniel Benatar said. Intel previously received about $2 billion over the past fifty years in the form of Israeli grants at other facilities inside Israel.
Ofir Yousefi, deputy director general of the Israel Investment Authority, said: Intel chose a higher grant and tax rate over offering a lower grant and lower tax rate.
He added to Reuters: The process took months because a grant of this size requires independent review and analysis to ensure its economic feasibility. Stressing that Israel will reap much greater financial and economic benefits.
Finance Minister Bezalel Smotrich said, referring to the timing of the deal, “This investment occurs at a time when Israel is waging a war against absolute evil, a war in which good must defeat evil, and it is an investment in the correct and righteous values that herald progress for humanity.”
Intel – whose investments will extend over five years – will pay a corporate tax rate of 7.5% instead of 5% previously. The regular tax rate is 23%, but under the Israeli law to encourage investment in development areas, companies receive significant advantages.
In addition to the grant amounting to 12.8% of the total investment, the chipmaker has committed to purchasing NIS 60 billion ($16.6 billion) worth of goods and services from Israeli suppliers over the next decade, while the new facility is expected to create many job opportunities.
Intel established its first branch in Israel in 1974, and now operates four development and production sites, including its factory in Kiryat Gat called Fab 28, which produces Intel 7 chip technology, or as 10-nm chips are called, and employs approximately 12,000 employees inside Israel. They indirectly employ another 42,000.
Intel’s exports amount to about $9 billion, and constitute 5.5% of total high-tech exports. Among the products that it exports to the world and is manufactured in Israel is the Centrino chip, which allows the use of the Wi-Fi network and its basic processors.
Intel – which bought the Israeli self-driving car technology company Mobily for $15.3 billion in 2017 – refused to disclose the technology that will be produced by the new Fab 38 factory, on which Intel says construction has already begun.
Last June, Prime Minister Benjamin Netanyahu said that Intel would build a new chip factory worth $25 billion in Israel, and the “Fab 38” factory is scheduled to open in 2028.
