Intel Receives $3.2 Billion Grant for Massive $25 Billion Chip Plant in Israel

Israel's government has approved a $3.2 billion grant for Intel's upcoming $25 billion chip plant in southern Israel. This marks the single largest investment ever made by a company in Israel, showcasing a significant commitment from the tech giant.

The announcement comes amid ongoing tensions between Israel and the Palestinian militant group Hamas, following the October 7th attack. Notably, this move by Intel serves as both a major show of support from a prominent U.S. company and a generous offer from the Israeli government, particularly noteworthy given increased international pressure on Israel to minimize civilian harm in Gaza.

Shares of Intel, with nearly 10% of its global workforce based in Israel, saw a positive response, opening up 2.73% at $49.28 on Nasdaq.

Intel's expansion plan involves its Kiryat Gat site, home to an existing chip plant located 42 km (26 miles) from the Hamas-controlled Gaza Strip. The company emphasized that this expansion is a crucial component of its strategy to build a more resilient global supply chain, complementing ongoing and planned manufacturing investments in Europe and the United States.

Under the leadership of CEO Pat Gelsinger, Intel has been investing heavily in building factories across three continents to regain dominance in chip-making and compete more effectively with rivals such as AMD, Nvidia, and Samsung. The new plant in Israel represents Intel's latest significant investment.

Daniel Benatar, Vice President at Intel, expressed gratitude for the support from the Israeli government, highlighting that it will ensure Israel maintains its position as a global center for semiconductor technology and talent.

While Intel has received around $2 billion in grants over the past 50 years for other facilities in Israel, this latest grant underscores the strategic importance of the new chip plant. Ofir Yosefi, Deputy Director General of Israel's Investments Authority, explained that Intel opted for a higher grant and tax rate over a lower grant and lower tax rate, emphasizing the economic viability and higher fiscal benefits for Israel.

Finance Minister Bezalel Smotrich framed the investment as not just financial but as an endorsement of values, stating it is an investment in "right and righteous values that spell progress for humanity."

Intel's commitment spans over five years, during which it will pay a corporate tax rate of 7.5%, up from the previous 5%. The standard tax rate in Israel is 23%, but the country offers substantial benefits to encourage investment in development areas.

This move aligns with Intel's global strategy, as evidenced by its plans to invest in chip-making plants in Germany and the U.S., with substantial subsidies and pledges from respective governments.

In addition to the grant, Intel committed to purchasing $16.6 billion worth of goods and services from Israeli suppliers over the next decade. The new facility is expected to create several thousand jobs, further contributing to Israel's economic landscape.

Intel, a long-established presence in Israel since 1974, operates four development and production sites, employing nearly 12,000 people directly and indirectly impacting another 42,000. The company's exports, accounting for 5.5% of total high-tech exports, have played a crucial role in Israel's technology sector.

The new Fab 38 plant, expected to open in 2028 and operate through 2035, marks a significant milestone in Intel's continued partnership with Israel, reaffirming the country's position as a key player in the global semiconductor industry.

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