Intel clinches $3.2b government grant for $25b chip plant expansion in southern Israel

Amid Israel’s war with Hamas, US chipmaker confirms plan for Kiryat Gat manufacturing facility, expected to create several thousand jobs

Sharon Wrobel is a tech reporter for The Times of Israel.

Intel's manufacturing plant in Kiryat Gat in southern Israel (Courtesy)
Intel's manufacturing plant in Kiryat Gat in southern Israel (Courtesy)

US semiconductor giant Intel Inc. has inked an agreement with the Israeli government for a $3.2 billion grant to expand its chip manufacturing facilities in Kiryat Gat, in the south of the country, at a total investment of $25 billion.

Back in 2019, Intel held talks for an investment of around $10 billion for the expansion of the Kiryat Gat chip plant, which was reiterated in 2021 during a visit of the chipmaker’s CEO Pat Gelsinger to Israel.

The additional commitment of $15 billion by Intel, Israel’s largest private employer and exporter, comes as the country is in a war with the Hamas terror group, after some 3,000 Iran-backed terrorists crossed the Gaza border in a devastating attack on October 7 that killed over 1,200 people, mostly civilians.

The Israeli government in June this year announced an agreement in principle over the investment, which was confirmed by Intel Tuesday.

“The expansion plan for the Kiryat Gat site 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.

According to the agreement, the US chipmaker will get a government grant of $3.2 billion, which is 12.8% of the total investment amount. In exchange, Intel committed to buy NIS 60 billion worth of goods and services from Israeli suppliers over the next decade and create several thousand jobs at the Kiryat Gat manufacturing site.

Intel core processor Intel vPro. (Courtesy)

At Intel’s Kiryat Gat plant, the chips that drive most of the PCs in the world have been manufactured for over 20 years, according to the semiconductor.

The expanded Kiryat Gat facility is expected to open by 2028 and remain in operation until at least 2035. Intel said that construction work has already started, including clean rooms and support buildings. A significant portion of the buildings, including the casting of piles and first floors, has been completed, the chipmaker added.

“Support from the Israel government will enable us to ensure that Israel remains a global center of semiconductor technology and talent,” said Daniel Benatar, co-general manager of Intel Israel.

Finance Minister Bezalel Smotrich on Tuesday called Intel’s investment commitment during wartime “an expression of confidence in the State of Israel and the Israeli economy.”

“This investment will promote quality employment and high productivity in the peripheral communities and will have an impact on the growth of the Israeli economy,” Smotrich commented.

Intel in June announced major capital investments in facilities around the world, including plans to invest €30 billion to build two semiconductor fabs — fabrication plants — in Germany and $4.6 billion for the establishment of a semiconductor assembly and test site in Poland.

Intel, which has been active in Israel since 1974, employs almost 12,000 employees at its three R&D centers — in Haifa, Petah Tikva and Jerusalem — as well as at its manufacturing plant in Kiryat Gat. The company says it is currently responsible for creating indirect employment for approximately 42,000 workers in Israel.

Over the past five decades, Intel has invested more than $50 billion into its operations in Israel, including $10 billion at the Kiryat Gat manufacturing facility, the chipmaker said on its Israel website.

Earlier this year, the tech giant backed out of the $5.4 billion acquisition of Migdal Ha’emek-based firm Tower Semiconductor, due to regulatory issues from Chinese authorities. In 2017, Intel bought Mobileye, a Jerusalem-based maker of self-driving technologies, for over $15 billion, a transaction that remains the biggest exit of an Israeli company to date.

Intel Israel in 2022 posted record exports of $8.7 billion, constituting 1.75% of Israel’s entire GDP and 5.5% of all Israeli tech exports, according to the firm’s corporate responsibility report. Intel Israel purchased $3.5 billion in goods and services from Israeli businesses, up 60% from the $2.2 billion recorded in 2021.

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