Intel to boost chipmaking in Israel, but won’t confirm $25b deal lauded by Jerusalem

Taking tech giant by surprise, Israeli government in June disclosed Intel’s ‘unprecedented’ planned investment, calling it largest ever by a global private company in the country

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

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

Two weeks after the Israeli government boasted of landing the largest-ever international investment for the country, US chipmaker Intel Corp. still declines to confirm the “specific details of the project” for now.

Taking Intel by surprise, the Finance Ministry and Prime Minister Benjamin Netanyahu last month announced that it had inked an agreement “in principle” with the US semiconductor giant for an “unprecedented” investment of $25 billion to expand its chip manufacturing facilities in Kiryat Gat, south of Tel Aviv.

Intel did confirm the “intention to expand manufacturing capacity in Israel” and said it “submitted a business plan to upgrade” the Kiryat Gat plant, but noted that “specific details of the project are not being disclosed at this time.”

In 2019, Intel held talks for an investment of around $10 billion for the expansion plan 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 comes as 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.

“The multi-year project to upgrade the Kiryat Gat facility is being undertaken to meet future manufacturing needs and support Intel’s IDM [integrated device manufacturing] 2.0 strategy… and we appreciate the continued support of the Israeli government,” Intel said.

According to the agreement in principle announced by the Finance Ministry in June, Intel will pay a 7.5% tax rate, up from the 5% the chipmaker pays the state today. In exchange, it was agreed that the US chipmaker would get a government grant at a rate of 12.8% of the investment amount.

The expanded Kiryat Gat facility is expected to open by 2027 and remain in operation until at least 2035, employing thousands of workers at higher-than-average wages, the ministry said.

“Israel is a global center of technical talent and innovation and one of Intel’s significant global manufacturing and R&D centers,” Intel stated. “Since its establishment in 1974, Intel Israel has played a crucial role in Intel’s global success.”

Intel employs 11,700 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 employments positions for approximately 42,000 workers in Israel.

Last year, the tech giant announced the acquisition of Migdal HaEmek-based firm Tower Semiconductor for $5.4 billion. 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 high-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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