Intel to close Jerusalem plant; most workers safe but transferred

Israel’s largest tech employer shifting employees to recently upgraded Kiryat Gat facility; R&D center largely unaffected

Former prime minister Ehud Olmert, with Intel Israel General Manager Maxine Fassberg, cuts the ribbon at the opening of Intel's new R&D center in Jerusalem, 2009 (Courtesy Intel)
Former prime minister Ehud Olmert, with Intel Israel General Manager Maxine Fassberg, cuts the ribbon at the opening of Intel's new R&D center in Jerusalem, 2009 (Courtesy Intel)

In the first practical effect seen locally of a recent decision by Intel to restructure and cut back on its workforce, the company announced that it was closing its production plant in Jerusalem. Nearly all of the 170 workers will stay on with the company but will be transferred to Intel’s large Kiryat Gat production facility 70 kilometers (40 miles) from the capital.

The company’s Jerusalem R&D facility will remain intact and in place. Intel Israel is the country’s largest single employer in the tech sphere, with over 10,000 employees and tens of thousands more in companies that supply it with products and services

In a recent statement, Intel announced that it needed to do some “restructuring” in order to compete in the Internet of Things era. The restructuring will “accelerate [Intel’s] evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices. Intel will intensify its focus in high-growth areas where it is positioned for long-term leadership, customer value and growth, while making the company more efficient and profitable.”

Those “billions of smart connected devices” are likely mobile devices – smartphones, tablets, and the like – as well as Internet of Things devices. Israel is a world center for Intel’s processor development – with processors generally going into PCs and laptops, the exact devices Intel is “accelerating away” from. On the other hand, Skylake – the new processor developed largely at Intel Israel and the building block of the next generation of its range of devices – comes in various sizes, with iterations for laptops, tablets, mobile devices, and even for Internet of Things devices.

Indeed, the company, like so many others, is looking for IoT to greatly expand chip business, which is Intel’s core activity. Fifty billion IoT devices will be coming online in the next decade, experts say, and the company that builds the slimmest, most powerful, and best-connected chips with the most capabilities and features is likely to dominate the industry. Last year, Intel opened an IoT lab in Haifa.

In 2014, Intel announced that it would upgrade the Kiryat Gat facility to produce its next generation of computer chips. That announcement signaled the end of a long-running drama 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.

That announcement included a promise by the Israeli government that it would provide Intel with major tax breaks and other benefits worth $600 million – with commitments by Intel to continue growing its presence in Israel. Among those commitments: an increase in production capacity in the refurbished plant compared to previous production levels; a guarantee that workers will continue to be employed, even if Intel’s business falls off; an increase of at least 10% annually in the value of local purchases made by Intel, based on 2013 figures; funding more academic research projects and providing more scholarships for Israeli students, to the tune of at least $1 million a year; and a commitment to give Israeli workers and contractors preference in the plant upgrade work.

In a statement Wednesday, Intel said that it “continues to advance its evolution as a company” and that it would close the Jerusalem facility as it integrated the activities there to other locations. “We are committed to helping all the workers who will be affected by this transition process, and we will offer the vast majority of them other roles in Intel, mostly at the Kiryat Gat facility. Most of the employees at the Jerusalem R&D facility will work as usual and will not be affected by this process.”

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