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Finance minister confirms Intel to get $1 billion grant for massive expansion

Kahlon says that in return, chip-making giant will invest $11 billion to increase its operations in the country, government funding needed to remain competitive

Finance Minister Moshe Kahlon speaks in the Knesset on January 9, 2019. (Noam Revkin Fenton/Flash90)
Finance Minister Moshe Kahlon speaks in the Knesset on January 9, 2019. (Noam Revkin Fenton/Flash90)

Finance Minister Moshe Kahlon confirmed Tuesday that US electronic chip-making giant Intel will receive a $1 billion grant in return for making an $11 billion investment to expand its chip manufacturing operations in the country.

“The moment the company comes to Israel and invests $10 billion, and it receives a grant of 9 percent, that means 91% of it stays here,” Kahlon told Army Radio. “There are always such discounts, there are always incentives.”

A spokesperson for Kahlon told Reuters the details of the grant were hammered out during negotiations over the past year. Such grants, the spokesman said, are needed if Israel is to compete for investment opportunities with countries like Ireland.

The revelation about the grant came after Intel said earlier in the day that it was expanding its operations in Israel.

“Intel today announced it will submit a business plan to the government of Israel for continued investment in the company’s Kiryat Gat manufacturing site,” a statement from Intel’s Israeli representatives said.

Daniel Benatar, the general manager of the company’s manufacturing plant in Kiryat Gat, said the plan shows the tech firm “continues to demonstrate the strong performance of Intel Israel and we continue to lead in terms of corporate economic and social investment in Israel.”

The tech giant said it would not comment on schedules, costs and technologies of the project.

Kahlon said late Monday he was informed by Intel of its decision “to invest another 40 billion shekels (almost $11 billion), an unprecedented decision expected to bring thousands of jobs to the south.”

Intel’s plant in Kiryat Gat (Courtesy)

Economy Minister Eli Cohen said Intel had chosen to “build its most advanced plant here in Israel.”

A Globes report earlier Monday said the deal was contingent on the US tech mammoth receiving hefty help from the state with a grant worth 10 percent of the investment.

In May, Intel confirmed plans to expand its Kiryat Gat production plant in Israel, where it produces and develops some of its most advanced computer chips, through 2020.

The company already pays a reduced 5% tax rate, which it would not seek to change under the arrangement, according to the report.

The US firm is transitioning from being a maker of silicon computer chips to a data-centric company, with activities ranging from the manufacturing of chips to developing safety features in vehicles, wireless phone connections, drones and cloud-based technologies.

An $11 billion infusion by Intel would be one of the largest ever into the Israeli economy, topped only by Intel’s $15 billion purchase of car software maker Mobileye in 2017.

Since setting up operations in Israel in 1974, the US firm has made cumulative investments and acquisitions of some $35 billion in Israel, as of May 2018, and has grown into the largest private sector employer in the high-tech industry.

Workers at Intel’s Kiryat Gat plant (Courtesy)

Aside from the manufacturing plant in Kiryat Gat, in the northern Negev, Intel has  R&D centers in Jerusalem, Petah Tikva and Haifa.

The Silicon Valley giant currently employs 11,700 people in Israel in its Kiryat Gat plant and development centers across the country, in addition to 1,170 employees of Mobileye, a maker of advanced driver assistance systems which it purchased in 2017 for $15.3 billion.

Intel’s exports from Israel reached $4 billion in 2018, according to the company.

Shoshanna Solomon and AFP contributed to this report.

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