Intel green lights $5 billion investment in Israel plant

The US semiconductor giant Intel Corp. on Tuesday confirmed plans to invest $5 billion (NIS 18 billion) into expanding its Kiryat Gat production plant, through 2020.

As part of the massive investment plan — which is set to be approved by the relevant government offices in Israel in coming weeks — Intel will buy over NIS 3 billion worth of products from local suppliers and add some 250 people to its workforce in outlying areas of the country in the coming years, the Finance Ministry said in an emailed statement.

The plan could pave the way for future technological upgrades at the site, the statement said. It is also an important strategic investment for the nation and the first significant investment of a multinational in Israel since the implementation of US President Donald Trump’s tax reform, the statement said. The reform makes it more attractive for US and international firms to set up operations inside the US.

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As part of the investment plan, Intel is expected to get a 5 percent tax rebate until the end of 2027, as well as a NIS 700 million government grant. Should the firm decide to make a further strategic investment to significantly upgrade its plant technologically, then the US giant will be eligible for an additional NIS 700 million grant for that added investment. The grants are to “incentivize the firm to make the future investment, which is supposed to be significantly higher than past investments made by the company and higher than the current investment,” the statement said.

Intel Corp.’s 8th-Gen-Intel-Core-i3-8100 chips (Courtesy)

Finance Minister Moshe Kahlon said he received notification from the Intel vice president and general manager of Intel Israel, Yaniv Garty, about the approval of the investment plan.

“After two years of intensive work, the management of the global company accepted our proposal to invest another NIS 18 billion in expanding the company’s activity in Israel,” Kahlon said in the statement. “This is tremendous news for the economy, which expresses confidence in the country and positions us as a leading global economy.”

There was competition among several countries for Intel’s investment, he said, and Israel worked closely with the firm to finalize the investment plan.

“The investment that will be implemented over the next two years will inject additional energy into high-tech in the periphery and will encourage employment,” Shai Babad, the director general of the ministr, said in a statement.

Minister of Economy and Industry Eli Cohen said that “Intel’s choice to continue to invest significantly in Israel is an important expression of confidence in the State of Israel and in the Israeli economy. We see Intel as a partner and its renewed choice to invest in Israel reinforces the economy and employment in Israel and we expect this cooperation to continue in the future as well. More than 320 foreign companies operate in Israel and make a significant contribution to growth, innovation, export and employment.”

Intel’s latest investment in Israel comes on the heels of a $6 billion upgrade of the same plant in southern Israel announced by the company in 2014, to enable the production of Intel’s most advanced next generation computer chips, reportedly the 10 nanometer chips.

Since setting up operations in Israel in 1974, the US firm has made cumulative investments and acquisitions of some $35 billion in Israel and has grown into the largest private sector employer in the high tech industry, employing 11,000 workers. The firm last year acquired automotive technology firm Mobileye for a whopping $15.3 billion. There are some 1,000 additional workers employed in Mobileye. Intel has a manufacturing plant in Kiryat Gat, and R&D centers in Jerusalem, Petah Tikva and Haifa.

In 2017, Intel exported products and services totaling $3.6 billion from Israel, accounting for 8% of all high tech exports from Israel, according to data provided by the firm.

“Intel and Israel are a story of a wonderful partnership that began in 1974, when the State of Israel began to realize the Israeli dream,” Yaniv Garty, Intel vice president and general manager of Intel Israel said in a separate statement on Tuesday. “Intel believed in the potential of the young state and established its first development center outside of the US in Israel. Intel has grown steadily in Israel, contributing greatly to Intel’s achievements.”

Intel’s venture capital arm, which makes both strategic and financial investments in startups for Intel Corp., has invested more than $375 million in some 80 Israeli startups since it started investment activities in Israel in 1997. Company officials recently told The Times of Israel that they see significant investments in Israeli startups in 2018.