Intel in Israel: A 50-year love affair

• Published date: 08 March 2024
• Author: SHLOMO MAITAL
• Publication title: Jerusalem Post, The: Web Edition Articles (Israel)

There was another announcement that day – a happier one

The world's largest chip manufacturer, Intel, confirmed it will invest $15 billion in its manufacturing facility in Kiryat Gat, added to the $10 billion investment announced in 2019. In return, the Government of Israel will provide Intel with a grant of $3.2 billion – the largest of its kind ever.

Intel's new fabrication plant, Fab 38, alongside existing Fab 28, will begin producing microprocessors in three to four years, using state-of-the-art ultraviolet lithography.

At a time when the Bank of Israel was desperately selling up to $45 billion from its reserves to support the slumping shekel, Intel's investment in Israel was more than an against-the-tide deal. It was a strong vote of confidence and a boost to morale. And a big win-win.

William Moss, head of Intel corporate communications, wrote in an email to me that the expansion plan for Kiryat Gat "was an important part of Intel's efforts to foster a more resilient global supply chain."

The deal

Writing in The Times of Israel, journalist Sharon Wrobel reported some of the details of the $25 billion deal.

Intel will pay a 7.5% tax rate on its profits, up from the 5% Intel pays today. The government will pay Intel a grant of 12.8% of the $25 billion, or $3.2 billion, under the Encouragement of Capital Investment Law. The new plant in Kiryat Gat is expected to open in 2027.

As part of the deal, Intel commits to buying $60 billion in products and services from Israeli companies over the next decade.

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How did Israel decide on whether to invest in Intel's investment? Finance Ministry Budget Director Yogev Gardos has frequently tangled with his minister, Bezalel Smotrich, in the past. He explained that "negotiations were based on economic models to examine the benefits of the investment."

Over a year ago, US President Joe Biden severed China's access to the Western tools and skilled workers it needed to build the most advanced semiconductors. In 2023, press reports told of the closure of numerous Chinese chip-related companies.

Intel has stepped up to the plate to help fill the gap in chip supply caused by the China embargo and is building plants in the US, as well as in Israel. The Wall Street Journal reports that the Biden administration will award billions of dollars in subsidies to Intel, Taiwan Semiconductor Manufacturing Co. (TSMC), and other top semiconductor companies to help build new factories in the US. The initiative is part of...