Intel gives firm commitment on new Israeli fab

Intel Israel sources: A senior Intel manager may have said what he said, but there are people more senior than him.

Sources inform ''Globes'' that Intel (Nasdaq:INTC) has informed Investment Promotion Center director Hezi Zaieg that it will build its next fab in Israel. The Investment Center has received a written commitment for the establishment of Fab 28 in Kirayt Gat from Intel Israel managing director Alex Kornhauser, so there is no doubt that Intel has decided to build it in Israel. Intel has bought a 300-dunam (175-acre) site in the Kiryat Gat industrial zone, adjacent to Intels current fab, for the new fab.

The decision belies statements by Intel SVP and general manager Technological Manufacturing Group Robert Baker in the US this week that no official decision had been taken concerning establishing the fab in Israel, despite a telephone call to that effect to Prime Minister Ariel Sharon from Intel CEO Craig Barrett over the weekend. The Intel manager made the comment in an announcement on building the Intel Fab 32 in Arizona.

Intel also announced that it would officially apply to the Investment Center for a $4 billion investment next week. The Investment Center will then be able to send the application immediately to the Industrial Development Bank of Israel (TASE:INDD.P), which will carry out a viability study. Construction of Fab 28 will begin when the letter of authorization is received.

The Investment Center assumes that a grant to Intel amounting to 15% of the investment ($525 million) will generate a clear benefit to the economy, on the basis of preliminary studies, data presented by Intel, and Israels experience with Intels first fab in the country, which generated NIS 3.5 billion in added value within five-six years. Intel received a $580 million grant for that fab.

At a recent meeting between representatives of the Prime Ministers Office, Ministry of Finance, and Ministry of Industry, Trade and Labor with Intel VP finance and enterprise services and director, tax, licensing and customs Nanci S. Palmintere, she said, Give me the money, and Im authorized to tell you yes today that the new fab will be built in Israel, without having to return to Intel for approval.

Zaieg said, There is no doubt that Intel has decided to invest in Israel. After examining all the alternatives, Intel decided that Israel was best. Intel received immediate tax breaks in Arizona, but in Israel, this is subject to a viability study, which will be completed by the end of the year.

Intel Israels management issued a denial of Bakers comment, saying, Bakers comments were taken out of context, and in no way referred to the establishment of Intels fab in Israel. They merely referred to the examination of sites for new fabs around the world.

Sources at Intel Israel told Globes this morning, A senior Intel manager said what he said, but there are people senior to him. There is a very solid basis for the Investment Centers statements.

Published by Globes [online], Israel business news - - on July 27, 2005

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