Israel Approves $3.2 Billion Grant to Intel for Construction of $25 Billion Chip Plant

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The Israeli government has agreed to provide Intel Corp with a grant of $3.2 billion for the establishment of a new $25 billion chip manufacturing facility in southern Israel. This marks the largest investment ever made by a company in Israel and demonstrates a significant show of support from a major U.S. corporation. The announcement comes amid ongoing tensions in the region, particularly with the conflict between Israel and the Palestinian militant group Hamas following the attack by Hamas on October 7. The generous offer by the Israeli government highlights its support for major investments, especially during a time when the United States has been pressing Israel to take steps to minimize civilian harm in Gaza.

Intel’s stock experienced a 1.9% increase in pre-market Nasdaq trading, reaching $48.90 per share following the news.

The expansion project at its Kiryat Gat site, situated about 42 kilometers (26 miles) away from the Hamas-controlled Gaza region, is described by Intel as a crucial aspect of the company’s efforts to reinforce a more resilient global supply chain. This initiative aligns with Intel’s ongoing and planned investments in manufacturing facilities across Europe and the United States.

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Under the leadership of CEO Pat Gelsinger, Intel has committed substantial funds toward building factories on three continents, aiming to regain its prominence in chip manufacturing and compete more effectively with rivals such as AMD, Nvidia, and Samsung. The newly proposed Israeli plant represents the latest major investment by the U.S. chip giant in recent years.

Intel’s strategic plans also encompass significant investments in Europe, with intentions to spend over 30 billion euros ($33 billion) on the development of two chip-making plants in Magdeburg, as part of a broader multibillion-dollar investment drive across the continent. Germany has offered substantial subsidies to attract this significant foreign investment, marking it as Germany’s largest-ever foreign investment.

Moreover, Intel’s previously announced plans involve an investment of up to $100 billion in constructing what could potentially be the world’s largest chip-making complex in Ohio. Competitors like Samsung and Taiwan Semiconductor Manufacturing Co (TSMC) have also revealed substantial investment intentions in the United States.

The Israeli finance and economy ministries view Intel’s investment as a significant vote of confidence in Israel’s economy, especially during this period of intense global competition to attract substantial investments in the semiconductor industry. They noted that the investment is expected to bring direct fiscal benefits to Israel that will surpass the state’s grant.

Finance Minister Bezalel Smotrich emphasized the significance of this investment in promoting values aligned with progress for humanity, particularly during challenging times when Israel faces complex conflicts.

In addition to the substantial grant, Intel has committed to purchasing goods and services worth 60 billion shekels ($16.6 billion) from Israeli suppliers over the next decade. It is anticipated that the new facility will create several thousand job opportunities.

Intel has been operating in Israel since 1974, with four development and production sites, including the Kiryat Gat manufacturing plant, known as Fab 28, which produces Intel 7 technology (10 nanometer chips). The company directly employs nearly 12,000 people in Israel and indirectly supports an additional 42,000 jobs.

Intel’s exports from Israel amount to around $9 billion, contributing 5.5% to the total high-tech exports of the country. Notably, Intel previously acquired Israeli self-driving auto technology firm Mobileye for $15.3 billion in 2017.

Although Intel confirmed the commencement of construction for the new Fab 38 plant, it has not disclosed the specific technology that will be produced there.

Back in June, Prime Minister Benjamin Netanyahu had announced Intel’s plans to establish a new $25 billion chip plant in Israel. The Fab 38 plant is expected to commence operations in 2028 and run until 2035.