Intel has promised to spend at least $550 million in Israel in the next five years. The sum is part of a commitment by the company to spend a total of $6 billion to upgrade its Kiryat Gat plant for the manufacture of new advanced chips for its next generation devices. Intel and the Economy Ministry’s Industrial Cooperation Authority announced the deal on Sunday.
The $550 is part of Intel’s offset purchase arrangement with the state, which is providing the company with grants of up to $600 million over the next five years as well as a major tax break through 2023. Intel is set to receive two $300 million grants, distribution of which will be spread over five budget years. More valuable for Intel is likely to be the fact that it will have to pay a corporate tax of only 5% through 2023 (the standard rate of company tax in Israel in 2014 was 26.5%). In return, Intel committed to hiring at least 1,000 new employees, at least half of whom will be residents of communities in southern Israel. In addition, the company promised to spend at least $550 million over the period.
Some might point out that Intel is basically committing to spend what it is getting from the government in direct grants, but statements by Economy Ministry officials were enthusiastic about the benefits of the deal to the Israeli economy. “This arrangement will have a very positive effect on hundreds of small businesses and suppliers,” said Ziva Eiger, director of investments at the Industrial Cooperation Authority.
“Offset agreements such as this are platforms for leveraging public expenditures for the benefit of the Israeli economy, both for training and encouraging further expansion of small suppliers for the local and world market, and to enhance Israel’s brand as an attractive place for foreign investment,” Eiger added. “As a result of this agreement, Israelis can look forward to thousands of more jobs being available. It is a model for offset agreements that can provide benefits to all sides.”
Besides, said Mooly Eden, Intel international senior vice president and CEO of Intel Israel, such deals are very common among countries – like Israel and Ireland, which competed for the new Intel upgrade. “The government here, like governments everywhere, knows how the game is played,” and the jobs that are generated by investments in development centers are well worth it for Israel – especially when it comes to Intel, Eden said in a recent interview. “Over the years Intel has invested $10.8 billion in Israel. 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.”
Intel already employs some 10,000 workers in Israel directly, and according to the company, is responsible for a “multiplier effect” in hiring, with over 30,000 Israelis working at companies that provide products and services to Intel, he added.
Along those lines, said Maxine Fassberg, general manager of Intel Israel, “the deal between the company and the Industrial Cooperation Authority is a clear expression of Intel’s further contribution to Israel’s economy, and to the development of new technology products in Israel, many of which Intel has assisted in. Intel works with a large number of suppliers in southern Israel,” which helps to bolster the economy there as well, she added.