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Israel has awarded Intel with a $3.2 billion grant for the construction of a new $25 billion chip plant, marking the largest investment made by a company in the country.
Middle East Technology

Israel has awarded Intel with a $3.2 billion grant for the construction of a new $25 billion chip plant, marking the largest investment made by a company in the country.

The Israeli government has approved a $3.2 billion grant for Intel to construct a $25 billion chip factory in southern Israel. This partnership, announced on Tuesday, marks the biggest investment by a company in Israel.

The announcement arrives while Israel is engaged in a conflict with the Palestinian extremist organization Hamas following their attack on Israel on October 7. It is also a significant display of solidarity from a leading American corporation and a considerable gesture from the Israeli government, especially as the US has recently urged Israel to take more action to decrease harm to civilians in Gaza.

Intel’s shares, with around 10% of its employees based in Israel, saw an opening increase of 2.73% to $49.28 on the Nasdaq market.

Intel stated that their expansion plans for their Kiryat Gat location, situated 42 kilometers (26 miles) away from Gaza under Hamas control, are a crucial component of their efforts to strengthen their global supply chain. This expansion will be accompanied by additional investments in manufacturing facilities in Europe and the United States.

Intel, led by CEO Pat Gelsinger, has made significant investments in constructing factories on three different continents in order to regain its leading position in the production of computer chips and more effectively compete against competitors such as AMD, Nvidia, and Samsung. The recent establishment of a new plant in Israel marks yet another venture for the American chip manufacturer in recent times.

Intel vice president Daniel Benatar stated that the support of the Israeli government will guarantee that Israel maintains its position as a leading hub for semiconductor technology and skilled individuals.

In the past 50 years, Intel has received approximately $2 billion in Israeli grants for other facilities located in the country.

Ofir Yosefi, the deputy director general of Israel’s Investments Authority, stated that Intel opted for a larger grant and tax percentage instead of accepting an offer for a smaller grant and lower tax rate.

According to Reuters, the procedure took several months because a grant of this size required thorough evaluation and an independent analysis to confirm its economic feasibility. It was concluded that Israel would experience significant fiscal and economic advantages, he explained.

Finance Minister Bezalel Smotrich stated that this investment is being made during a time of war in Israel against evil and in support of good triumphing over bad. This investment is a commitment to the values of progress for all of humanity.

Over a period of five years, Intel’s investment will result in a corporate tax rate increase from 5% to 7.5%. The standard tax rate in Israel is 23%, but companies are eligible for significant incentives under the country’s law promoting development in certain areas.

In Magdeburg, Germany, Intel intends to invest over $33 billion in constructing two facilities for producing chips. This significant investment is part of a larger effort by the company to expand chip production in Europe. The German government has promised generous financial incentives to entice Intel’s record-breaking foreign investment.

In 2022, Intel announced plans to invest a maximum of $100 billion in constructing what could potentially be the biggest chip-manufacturing facility in Ohio, USA. Competitors Samsung and Taiwan Semiconductor Manufacturing Company (TSMC) have also revealed significant investment strategies in the United States.

The chipmaker has agreed to purchase $16.6 billion worth of goods and services from Israeli suppliers over the next ten years, in addition to providing a grant that makes up 12.8% of the total investment. This new facility is projected to generate thousands of job opportunities.

Intel, one of approximately 500 international companies in Israel, first entered the country in 1974 and currently has four sites dedicated to development and production. This includes their Fab 28 facility in Kiryat Gat, which manufactures Intel 7 technology (also known as 10 nanometer chips) and has a workforce of nearly 12,000 employees. Additionally, Intel’s presence in the country indirectly provides employment for an additional 42,000 people.

At some $9 billion, Intel’s exports account for 5.5% of total high-tech exports. The Centrino chip, which enables the use of WiFi, and its Core processors were developed in Israel.

Intel has acquired Mobileye, an Israeli company specializing in self-driving car technology, for $15.3 billion in 2017. The company has not disclosed the specific technology that will be manufactured at their new facility, Fab 38. Construction for the new plant is already underway, according to Intel.

In June, Prime Minister Benjamin Netanyahu announced that Intel plans to construct a $25 billion chip factory in Israel. However, Intel had not yet confirmed this investment.

The Fab 38 factory is scheduled to begin operations in 2028 and continue until 2035.