The Israeli government and Intel have reached an agreement, granting the American tech giant a substantial $3.2 billion subsidy. This financial support aims to facilitate the establishment of a cutting-edge $25 billion semiconductor factory in southern Israel, marking the largest investment ever made by a company in the country, according to reports from both sides on Tuesday.
These developments unfold against the backdrop of Israel’s ongoing conflict with Gaza, with Hamas initiating “Operation Sword of Al-Aqsa” on October 7th. Intel’s commitment to constructing the $25 billion semiconductor factory is viewed as a noteworthy investment from a major American corporation, serving the interests of the Israeli government. This comes at a time when the United States is intensifying pressure on Israel to take additional measures to minimize civilian casualties in Gaza.
Intel’s stocks, which employ just under 10% of its global workforce in Israel, experienced a 2.73% rise, reaching $49.28 on the NASDAQ stock exchange.
The expansion plan for Intel’s site in Kiryat Gat, home to an existing chip factory situated 42 kilometers from the Gaza Strip controlled by Hamas, is deemed a crucial component of Intel’s strategy to fortify its global supply chain. This expansion aligns with the company’s continuous efforts to attract investments from Europe and the United States.
Intel, under the leadership of CEO Pat Gelsinger, has invested billions of dollars in establishing factories across three continents to reclaim its dominance in the chip industry and better compete with rivals such as AMD, Nvidia, and Samsung. The newly proposed factory, referred to as Fab 38, is a key element of this strategic expansion.
Daniel Benatar, Intel’s Deputy CEO, affirmed that government support ensures Israel remains a global hub for semiconductor technology and talent. Over the past fifty years, Intel has received approximately $2 billion in Israeli grants for other facilities within the country.
Ofer Yosefi, Deputy Director General of the Israel Investment Authority, explained that Intel opted for a higher subsidy and tax rate in exchange for a smaller subsidy and lower tax rate. The approval process for such a substantial grant took months, involving an independent economic review to ensure its economic viability, with Israel expected to reap significantly greater financial and economic benefits.
Israel’s Finance Minister, Tzachi Hanegbi, noted the significance of the deal’s timing, stating that the investment occurs during a time when Israel is engaged in a battle against absolute evil. He emphasized that it is an investment in values that promise progress for humanity.
As part of the deal, Intel, spreading its investments over five years, will pay a corporate tax rate of 7.5% instead of the previous 5%. While the regular corporate tax rate is 23%, Israeli law provides significant incentives for companies investing in development areas.
In addition to the subsidy reaching up to 12.8% of the total investment, Intel committed to purchasing $16.6 billion worth of goods and services from Israeli suppliers over the next decade. The establishment of the new facility is expected to generate numerous job opportunities.
Intel, established in Israel in 1974, currently operates four development and production sites, including its Fab 28 factory in Kiryat Gat. The facility employs nearly 12,000 people directly in Israel and indirectly supports an additional 42,000 jobs.
Intel’s exports from Israel contribute around $9 billion, making up 5.5% of the total exports of high-tech products. Among the products exported worldwide and manufactured in Israel is the Centrino chip, enabling Wi-Fi usage and its core processors.
Intel, which acquired the Israeli self-driving car technology company Mobileye for $15.3 billion in 2017, has not disclosed the technology that the new Fab 38 factory will produce. Prime Minister Benjamin Netanyahu announced in June that Intel would build a new $25 billion chip factory in Israel, with Fab 38 expected to open in 2028.
Leave a Reply