Israel grants Intel $3.2 billion for new $25 billion chip plant

JERUSALEM: Israel’s government agreed to give Intel Corp a $3.2 billion grant for new $25 billion chip plant it plans to build in southern Israel, both sides said on Tuesday, in what is the largest investment ever by a company in Israel.

The news comes as Israel remains locked in a war with Palestinian militant group Hamas in the wake of the Oct. 7 Hamas attack on Israel and is a big show of support by a major U.S. company and a generous offer by Israel’s government at a time when Washington has increased pressure on Israel to take further steps to minimise civilian harm in Gaza.

Intel’s shares were up 1.9% at $48.90 in pre-market Nasdaq trading.

The expansion plan for its Kiryat Gat site that is 42 km (26 miles) from Hamas-controlled Gaza is an “important part of Intel’s efforts to foster a more resilient global supply chain, alongside the company’s ongoing and planned manufacturing investments in Europe and the United States,” Intel said in a statement.

Under CEO Pat Gelsinger, Intel has invested billions in building factories across three continents to restore its dominance in chip-making and better compete with rivals AMD, Nvidia and Samsung. The new Israeli plant is the latest investment by the U.S. chipmaker in recent years.

Intel plans to spend more than 30 billion euros ($33 billion) to develop two chip-making plants in Magdeburg, as part of a multi-billion-dollar investment drive across Europe to build chip capacity. Berlin has pledged big subsidies to attract Germany’s biggest-ever foreign investment.

In 2022, Intel said it would invest up to $100 billion to build potentially the world’s largest chip-making complex in Ohio and rivals Samsung and Taiwan Semiconductor Manufacturing Co or TSMC also have announced big investment plans in the U.S.

Israel’s finance and economy ministries said Intel’s investment, especially in this period and in light of the global competition to attract significant investments in the field of chips, is a significant expression of confidence in Israel’s economy.

They said the investment has direct fiscal benefits for Israel that will be significantly higher than the state’s grant.

“This investment, at a time when Israel wages war against utter wickedness, a war in which good must defeat evil, is an investment in the right and righteous values that spell progress for humanity,” Finance Minister Bezalel Smotrich said.

In addition to the grant that amounts to 12.8% of the total investment, the chipmaker also committed to buy 60 billion shekels ($16.6 billion) worth of goods and services from Israeli suppliers over the next decade, while the new facility is expected to create several thousand jobs.

Intel established a presence in Israel and 1974 and now operates four development and production sites in Israel, including its manufacturing plant in Kiryat Gat called Fab 28 that produces Intel 7 technology, or 10 nanometer chips, and employs nearly 12,000 people in the country while indirectly employing another 42,000 more.

At some $9 billion, Intel’s exports account for 5.5% of total high-tech exports.

Intel, one of around 500 multinationals in Israel and which bought Israeli self-driving auto technologies firm Mobileye for $15.3 billion in 2017, declined to say what technology will be produced at the new Fab 38 plant that Intel says construction is already begun.

In June, Prime Minister Benjamin Netanyahu said Intel would build a new $25 billion chip plant in Israel but Intel until now had declined to confirm the investment.

The Fab 38 plant is due to open in 2028 and operate through 2035.