Intel in talks to pump $11 billion into new Kiryat Gat plant — report

US-based tech company wants state to pony up amount equal to 10% in exchange for massive investment; move comes after agreement to spend $5 billion on upgrading Kiryat Gat fab

Workers at Intel's Kiryat Gat plant (Courtesy)
Workers at Intel's Kiryat Gat plant (Courtesy)

US tech mammoth Intel is in talks to spend $11 billion on a new Israeli manufacturing facility, if it receives hefty help from the state, according to a report Monday.

Intel has held discussions with Finance Ministry officials over the past several weeks over a possible investment of some NIS 40 billion into a new fabrication plant, known as a fab, near Kiryat Gat, in exchange for a grant worth 10 percent of the investment, the Globes financial daily reported.

In May, Intel confirmed plans to invest $5 billion (NIS 19 billion) in expanding its Kiryat Gat production plant in Israel, where it produces and develops some of its most advanced computer chips, through 2020. As part of the investment plan, Intel is expected to get an NIS 700 million government grant.

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

According to Globes, talks are in an early stage and Intel, based in California, has not decided if it will build plants in Oregon, Ireland or Israel, or more than one location. The final investment in Israel could also end up being lower, according to Globes.

In December, the firm said it was planning on expansions in all three locations.

“With the biggest market opportunity in Intel’s history ahead of us, we will take the necessary steps to prepare our global manufacturing network for flexibility and responsiveness to changes in demand,” Ann Kelleher, senior vice president and general manager of Manufacturing and Operations at Intel, wrote. “We are now in the early planning phase for manufacturing site expansions in Oregon, Ireland and Israel, with multi-year construction activities expected to begin in 2019.”

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 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, employing 11,000 workers.

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

There was no immediate confirmation from either Intel or the Finance Ministry.

Shoshanna Solomon contributed to this report.

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