Intel suspends planned $15 billion expansion of southern Israel chip plant

Chip giant makes no link between war in Gaza and decision to freeze extra investment in factory being built in Kiryat Gat, says it remains ‘fully committed’ to the region

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

NEW YORK — Intel is halting the expansion of a major factory project in Israel, which was slated to pump an extra $15 billion toward a chip plant.

The chip giant in December said it would expand plans for a chip manufacturing plant in Kiryat Gat, in the south of the country, currently under construction, upping its investment from $10 billion to $25 billion to secure a $3.2 billion grant from the Israeli government.

Solicited by AFP, Intel on Monday gave no reason for the pause for the next phase and made no link to the ongoing war between Israel and Hamas in Gaza.

“Israel continues to be one of our key global manufacturing and R&D sites and we remain fully committed to the region,” the company said in a statement.

It added that “managing large-scale projects, especially in our industry, often involves adapting to changing timelines.”

“Decisions are based on business conditions, market dynamics and responsible capital management.”

Intel Corp.’s R&D center in Haifa. (Courtesy)

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

Israel is Intel’s third-largest country of operation by asset size, according to its annual report, after the United States and Ireland, and during the 2010s, Intel became the leading employer in Israel’s thriving tech sector.

The chips that drive PCs around the world have been manufactured at the company’s Kiryat Gat plant for over 20 years, according to the semiconductor.

The semiconductor giant has been present in Israel for fifty years. It 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 said in December that it is currently responsible for creating indirect employment for approximately 42,000 workers in Israel.

In August 2023, the company canceled a $5.4 billion deal to buy an Israeli company, Migdal HaEmek-based firm Tower Semiconductor after it reportedly failed to secure a go-ahead from Chinese regulators for the purchase as demanded by the contract. In order to back out of the contract, Intel was required to pay $353 million to Tower Semiconductor.

In 2017, the American company paid $15.3 billion to take control of Israeli start-up Mobileye, which specializes in assistance and autonomous driving.

Intel floated part of Mobileye’s capital on the New York Stock Exchange in October 2022, but retains control of the company.

Sharon Wrobel contributed to this report.

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