In its grant application to the Investment Promotion Center last week, Intel Corporation (Nasdaq: INTC) said that it was considering a further expansion of its fab in Kiryat Gat, in order to produce in two or three years silicon wafers with the innovative 15-nanometer technology, which is still under development.
If the upgrade is carried out, Intel's Kiryat Gat fab will become one of the multinational's most advanced fabs in the world. Intel plans to invest $4.8 billion in the upgrade, and pursuant to the Law for Encouragement of Capital Investments, it expects from the government a large grant, estimated at $600 million.
As part of the upgrade, Intel Israel will hire 1,300 additional employees. But, just six months ago, Intel received a $200 million grant to upgrade the Kiryat Gat fab. The upgrade is currently underway.
Sources inform ''Globes'' that that the Ministry of Industry, Trade and Labor is considering awarding the grant conditional on Intel opening its next fab in Beit She'an, in order to expand employment there and develop the town's human capital.
"The dilemma is difficult this time, and we're beginning to ask ourselves whether we have here a Catholic wedding between the State of Israel and Intel," a top government source told "Globes". "Over the years, we were afraid that if we said, 'No', Intel would tell us that it's leaving, because in its dialogue with the Investment Promotion Center and other agencies of the Ministry of Industry, it always made it clear that it had alternatives elsewhere in the world. It seems that this time we'll have to put the strength of our relations to the test and deal with this anxiety. After all, Intel didn’t come here out of Zionism. It's only business, every step is calculated. Do you know how much we'd have to cut all the ministries' budgets to give Intel $600 million?"
A top government official said, "Intel will have to give a lot to get so much money, far beyond what it's given to date."
During a conversation between several ministries a few days ago, including the Ministry of Finance which opposes the grant to Intel, ideas were floated to leverage the grant application, if it is actually made. A top official said, "We won't spend this money on Kiryat Gat. Intel has done all it can there. To receive $600 million, it will have to give and do a lot. Go to the north, to an unemployment hub, enable it to flourish, create something where there is nothing, bring good news."
Intel has refused to do this in the past, and still does. All its infrastructures are in Kiryat Gat, and building a new infrastructure in an area where it has no operations will require spending billions of dollars more.
Another question is if Israel is prepared to spend $600 million to encourage a multinational, why shouldn’t it approach other companies and ask what they are prepared to offer in exchange for a grant? After all, the world is large, and there are many prestigious high-tech companies and other places in Israel to develop.
"Intel won't get an enthusiastic automatic 'Yes' from us as in the past," a top government official told "Globes". "If it wants to get a 'Yes', it will be accompanied by quite a few big 'buts'."
Published by Globes [online], Israel business news - www.globes-online.com - on June 19, 2011
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