Intel said set to pump $6 billion into Kiryat Gat plant

Intel Israel announced Wednesday that it would file a plan with the government to upgrade its Kiryat Gat chip fabrication plant and invest a reported $6 billion dollars into the project.

Details of the plan are still being worked out, Intel said. The company stated it would announce its investment and the upgrade schedule in the coming weeks.

According to Globes, the high-tech company may receive a government grant of approximately five percent of its projected investment — NIS 750 million ($220 million). Channel 2 reported that the Israeli government would likely grant Intel hundreds of millions of shekels in tax breaks for the investment, which is projected to create thousands more jobs.

The announcement could signal the end of the drama that has surrounded Intel over the past several years, as the company considered where to build a new plant to produce advanced 10 nanometer chips. The chips will power new wearable technology and perceptual computing devices, which Intel believes will be a major growth area for the company in the coming years. Intel was said to be considering building the plant in either Israel or Ireland.

In Wednesday’s announcement, Intel did not say it would be upgrading the Kiryat Gat plant for that specific purpose, but sources inside the company said that this was indeed the meaning of the announcement. If so, the Intel investment would likely amount to billions of dollars, an industry source said.

In a statement Wednesday, Finance Minister Yair Lapid congratulated Intel for its decision. “I see this investment as an expression of faith in Israel’s economy. These investments will create thousands of jobs directly for Intel, and tens of thousands of jobs in the rest of the economy.”

Lapid added that Israel “will continue to help advance tech investments in Israel.” While the government did not announce anything about how the decision was made, it’s likely that the company was promised tax breaks or other benefits. At a recent Intel event, Mooly Eden, Intel International Senior Vice-President and CEO of Intel Israel, said that the decision on where to build the plant would likely hinge, at least to an extent, on where Intel can get the best deal in terms of grants and subsidies for the plant.

“I believe, of course, that Israel is the best place to build this,” said Eden. “We hope that we work with the government and continue to grow and expand here.

“The government here, like governments everywhere, knows how the game is played,” and the jobs that are generated by investments in development centers is well worth it for Israel – especially, Eden said, when it comes to Intel. “Over the years Intel has invested $10.8 billion in Israel,” he said. “Taking into account all of the services and outside contractors we use, Intel’s activities in Israel is responsible, in our estimation, for some 30,000 jobs in the Israeli economy. Last year, Intel Israel was responsible for more than 9% of Israel’s tech exports, which account for half of overall exports, except for diamonds.”

The issue of grants and benefits for multinationals in general is a sticky one, said Eden, and he is certainly not a disinterested party. “But in today’s world, this is how governments bring jobs in. It’s up to the government to decide, but I think that in terms of investment, Israel gets back a lot more from Intel than it does from other multinationals.”

Commenting on the announcement, Maxine Fassberg, General Manager of Intel Israel and director of the Kiryat Gat plant, said that “over the past 40 years Intel Israel has exported $35 billion worth of products, much of it from the plants in Kiryat Gat and Jerusalem. In 2013, the Kiryat Gat plant won the Intel Quality Award for its unique contributions to the company.”