Intel to upgrade new Kiryat Gat fab with $15b investment

Intel Kiryat Gat credit: Shutterstock

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The State of Israel will raise its grant for the fab to $3.12 billion, while Intel Israel will raise its companies tax rate to 7.5%.

Israel has reached agreement in principle with semiconductor giant Intel whereby it will upgrade the new fab that is currently building in Kiryat Gat. Two years ago, during a visit to Israel by its CEO Pat Gelsinger, Intel announced that it would invest $10 billion in the new fab. The Ministry of Finance has now announced that the company has undertaken to invest a further $15 billion, in exchange for Israel raising its grant for construction of the fab to $3.12 billion (NIS 11.1 billion).

Minister of Finance Bezalel Smotrich and Commissioner of Budgets Yogev Gardos have informed Prime Minister Benjamin Netanyahu and Minister of Economy and industry Nir Barkat of the successful outcome of what were described as tough negotiations with Intel. Other countries in which Intel maintains fabs, such as the US and Ireland, were mentioned as possible destinations for the new investment, but Intel eventually agreed to upgrade for a second time the production facility still under construction. It is believed that it will produce processors with the smallest geometry that Intel is capable of producing, using seven nanometer technology.

Under the agreement, each side will raise its commitment to the other. The State of Israel has agreed to raise its grant for the construction of the fab to 12.5% of the total $25 billion cost, that is, $3.12 billion, while Intel has agreed to raise the rate of companies tax it will pay from 5% to 7.5%. In January 2019, then minister of finance Moshe Kahlon reached agreement with Intel on an investment of NIS 35-40 billion in exchange for a government grant of NIS 3 billion, or about 9% of the investment, for the construction of Fab 38.

Intel is expected to hire thousands more people in Kiryat Gat as a result of its investment in the new fab, which is due to become operational in 2027 and to continue operating until 2035 at least.

"I welcome this huge achievement for the Israeli economy - NIS 90 billion, the largest ever investment by an international company in Israel," Netanyahu said. "This is a massive expression of confidence in the Israeli economy, in complete contrast to all the false reports against us."

"This unprecedentedly large investment will boost the growth of the Israeli economy in the coming years and promote good-quality employment with high productivity and salaries in communities in the periphery," Smotrich said.

Gardos thanked the management of Intel Israel and the professional team in the Budgets Division led by his deputy Kfir Battat for the way they had conducted the negotiations. "The negotiations with the company were conducted at length and in a professional manner on the basis of economic models for examining the benefit of the investment, in order to maximize its value for the Israeli public, while promoting the investment in Israel against the various options available to Intel Corporation," Gardos said.