Israel Agrees $3.2bn Grant For Intel $25 Billion Chip Factory

Intel and the Israeli government have confirmed plans to construct a $25 billion chip-making factory in Southern Israel.

Prime Minister Benjamin Netanyahu described the Intel move as the biggest investment in Israel’s history. Reuters reported that Israel’s government has agreed to give Intel a $3.2 billion grant for the new fab.

Intel already has 11,700 employees in Israel, after investing more than $50 billion in the country since 1974.

The confirmation that Intel will spend an additional $25 billion is a notable show of support for the country in the wake of the deadly 7 October Hamas attack, and the ongoing military operation in Gaza.

Israeli factory

Intel is seeking to expand its existing chip-making factory at Kiryat Gat – located 42 km (26 miles) from Hamas-controlled Gaza.

The news facility is an “important part of Intel’s efforts to foster a more resilient global supply chain, alongside the company’s ongoing and planned manufacturing investments in Europe and the United States,” Intel was quoted as saying in a statement.

“Support from the Israel government will … ensure that Israel remains a global centre of semiconductor technology and talent,” Intel vice president Daniel Benatar was quoted as saying.

Intel had previously received around $2 billion in the past 50 years in Israeli grants in other facilities there.

Prime Minister Netanyahu had initially announced the new factory in June, describing it as “the largest investment ever by an international company in Israel.”

Intel had only agreed the new factory in principle at that time.

Reuters reported that Intel’s investment will be over five years, and it will pay a corporate tax rate of 7.5 percent instead of 5 percent previously. The normal tax rate in Israel is 23 percent, but under a local law to encourage investment in development areas, companies receive large benefits.

The new factory, to be known as the Fab 38 plant, is due to open in 2028 and operate through 2035.

Other countries

Intel of course has also made significant investments in other countries, after been widely courted in the European Union and United States as a result from the chip shortages during the Covid-19 pandemic.

In September 2021 CEO Pat Gelsinger said Intel could potentially invest as much as 80 billion euros ($95bn) to expand chip production in Europe.

In March 2022, Intel had confirmed it would build a chip factory in Germany, in the east German city of Magdeburg.

In June 2023 Intel reached a deal with the German government over 10bn euros (£8.5bn) in subsidies for its postponed chip manufacturing facility in Magdeburg.

Across the pond in 2022, Intel said it would invest up to $100 billion to build potentially the world’s largest chip-making complex in Ohio.

Samsung and Taiwan Semiconductor Manufacturing Co have also announced big investment plans in the United States.