The Ministry of Finance and Ministry of Industry, Trade and Labor have redoubled their efforts to persuade Intel Corporation (Nasdaq: INTC) to make its next great investment in Israel. Intel is planning to invest $4.8 billion to build its next state-of-the-art fab to produce 15-nanometer technology processors.
Six months ago, Intel sought a $600 million grant from the Ministry of Industry's Investment Promotion Center in order to upgrade Intel's Fab 28 in Kiryat Gat. The ministry countered with an offer of NIS 700 million, on the condition that the company build a new fab in Beit She'an in the north. Intel did not conceal its disappointment with the offer, and, in September, signs grew that it was considering building the new fab in Ireland instead, in part to revamp its infrastructure there as the previous investment was in 2004.
A government official in the talks with Intel told "Globes", "The impression we're getting from Intel's representatives is that it is leaning heavily toward Ireland." He added, however, that the company was still very interested in building an assembly plant in Beit She'an.
Intel will make its final decision on the location of the next fab in two months. An Israeli government source said, "We haven’t missed the train yet, and we should use every means with Intel to keep the investment in Israel." Another source told "Globes", "They are thinking hard about the feasibility of an investment in Ireland, because that would cost them much more money than in Israel. In Ireland, they would have to build a new infrastructure which already exists in Kiryat Gat. Also, the economic situation in Europe and the uncertainty in local markets is causing second thoughts."
Israeli government officials said today they have the impression from their talks with Intel that there are disagreements between Intel's Israeli officers, including Intel Israel CEO Maxine Fassberg, and corporate officers in the US.
"Intel Israel people want to bring the investment here, and they see the economic logic of continuing investment in Israel, especially after the billions of dollars that the company has spent here in infrastructures and human capital over the past decade. But Intel's headquarters in the US see things differently, and it's possible that headquarters is being influenced by officeholders who previously worked in Ireland," a source close to the subject told "Globes".
Despite the Ministry of Finance and Ministry of Industry's intense desire for Intel to make the huge investment in Israel, they are unwilling to lay on the table a better offer to the company. "We understand the need to be attractive to Intel, but not much. We may make a slightly better offer that will include greater state investment to develop infrastructures, such as expanding the road network in the Beit She'an area, and we might increase the grant on the basis of the company in Beit She'an by another NIS 100-200 million - but that's it. Israel simply promises Intel economic certainty and stability, which does not currently exist in many other places in the world," said the source.
Intel said in response, "The company does not respond to rumors and speculation. The company has not yet made the final decision on the matter."
Published by Globes [online], Israel business news - www.globes-online.com - on October 26, 2011
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