A Transformative Investment in Technology
In a historic move, the Israeli government has green lit a remarkable $3.2 billion grant for Intel’s upcoming $25 billion chip plant in southern Israel. This landmark investment is the largest ever made by a company in Israel, symbolizing robust support from a major U.S. corporation.
Navigating Amidst Regional Tensions
This announcement comes against the backdrop of ongoing tensions as Israel grapples with the Palestinian militant group Hamas following an attack on October 7. The decision to back Intel’s venture reflects a substantial gesture from the Israeli government, aligning with increased pressure from Washington to minimize civilian harm in Gaza.
Intel’s Market Response
With almost 10% of its global workforce based in Israel, Intel saw a positive market response, with shares opening at $49.28 on Nasdaq and experiencing a 2.73% uptick.
Fortifying the Global Supply Chain
Intel’s expansion plan at the existing Kiryat Gat site, approximately 42 km (26 miles) from Gaza, is a strategic move to strengthen the global supply chain. This aligns with Intel’s broader strategy of significant investments in manufacturing facilities across Europe and the United States.
Global Investment Strategy
Led by CEO Pat Gelsinger, Intel has committed substantial funds to establish factories on three continents. This initiative aims to reclaim dominance in chip manufacturing and compete more effectively with industry counterparts like AMD, Nvidia, and Samsung. The Israeli chip plant represents the latest chapter in Intel’s series of significant investments.
Israel’s Role in Semiconductor Technology
Daniel Benatar, Intel’s vice president, emphasized the crucial support from the Israeli government in maintaining Israel’s prominence as a global hub for semiconductor technology and talent. Intel has received approximately $2 billion in grants over the past 50 years for its facilities in Israel.
Decision-Making Process and Economic Viability
Ofir Yosefi, deputy director general of Israel’s Investments Authority, clarified that Intel opted for a higher grant and tax rate after a meticulous review process. The decision was informed by an independent analysis confirming the economic viability of the grant, ensuring substantial fiscal and economic benefits for Israel. As part of the agreement, Intel will now pay a corporate tax rate of 7.5%, up from the previous 5%. This adjustment aligns with Israel’s efforts to encourage investment in development areas. Intel’s commitment spans five years, solidifying its dedication to the region.
Global Expansion Beyond Israel
Beyond Israel, Intel has expansive plans globally, intending to invest over 30 billion euros ($33 billion) in two chip-making plants in Magdeburg, Germany. This move is part of Intel’s multi-billion-dollar investment strategy across Europe to enhance chip capacity. Intel’s new Israeli facility is expected to generate several thousands of new jobs and to stimulate the economic growth of the country. Intel has also committed to purchase $16.6billion worth of goods and services from Israeli suppliers over the next decade alongside the $3.2 billion grant.
Intel’s Established Presence in Israel
Intel established a presence in Israel in 1974 and now operates four development and production sites. The Fab 28 manufacturing plant also known as the Kiryat Gat, is responsible for the production of Intel 7 technology which includes its 10- nanometer chips. Intel employs nearly 12,000 people directly and an additional 42,000 indirectly.
Intel’s exports from Israel, totaling around $9 billion, account for 5.5% of the country’s total high-tech exports. Key developments, such as the Centrino chip enabling WiFi use and the Core processors, were conceived and developed in Israel.
Looking Ahead: Fab 38 Plant
Prime Minister Benjamin Netanyahu’s June announcement has materialized with the confirmation of Intel’s investment in the Fab 38 plant. Set to open in 2028 and operate until 2035, this facility will play a pivotal role in Intel’s global chip production strategy. Although specific technologies remain undisclosed, construction is reportedly underway.
In a statement, Finance Minister Bezalel Smotrich emphasized that this investment aligns with the pursuit of righteous values during challenging times, highlighting progress for humanity.
