Two and a half weeks ago, a black plume of smoke rose above Intel’s veteran factory in Kiryat Gat, FAB28, a facility inaugurated nearly twenty years ago. The factory is one of the most advanced in Intel’s global network and is responsible for producing 10-nanometer chips, a flagship product found in laptops and servers. Upon the arrival of Magen David Adom and United Hatzalah emergency responders, it was determined that the neck of a gas cylinder had exploded while being unloaded from a truck. The incident resulted in the deaths of two workers-Ilya Chechulin (49) and Yakir Kosashvili (35), and left a third worker injured; he remains hospitalized at Soroka Medical Center
Intel’s official response was terse, expressing regret for the deaths of the two individuals and a pledge of full cooperation with the investigation, but the status of the manufacturing plant remained unclear until late last week. It was then that Intel CFO David Zinsner and CEO Lip-Bu Tan revealed the dramatic impact the accident in Kiryat Gat has had on the whole company.
Intel shares plunged by nearly 30% in the last two sessions of last week. The drop is driven not only by the accident in Kiryat Gat but also by a pessimistic outlook for PC sales, which led to a downward revision of the company’s fourth-quarter guidance.
Intel had feared that a missile from Iran or Gaza might strike the Kiryat Gat facility during the war, but it turned out that an accidental workplace incident rather than an attack caused the worst documented damage in the history of any Intel factory worldwide. During an investor call, Zinsner revealed that the Kiryat Gat facility had been closed for two weeks. He said that he expected production to resume by today, though he stopped short of guaranteeing it. "We feel like we are going to be starting up production here by the end of this week. While we are doing that, we are trying to assess all the wafers that are in the line and what is usable and what is not usable from those materials," he said in response to a question.
The CFO’s remarks are particularly concerning given his use of vague terminology: "This is, to some extent, a preliminary assessment-covering both the fourth quarter and the first quarter," he said. In other words, Zinsner does not rule out the possibility that the financial impact of the plant’s shutdown could extend into the coming year. He added: "But I think the current thinking is that we will have about a $300 million impact to the fourth quarter." Intel also expects that the shutdown will result in a 2-percentage-point decline in the gross margin forecast for the fourth quarter.
This worrying figure, and the investor reaction, underscores the extent of Intel’s reliance on its Israeli facility. While the 10-nanometer chips produced there may not represent the absolute cutting edge of technology today (Intel operates more advanced facilities in Ireland and the US that utilize 7 nanometer and 5 nanometer processes, and even the highly advanced 1.8 nanometer (18A) node) the output from Israel is critical to Intel’s flagship laptop lines. This includes the Alder Lake and Raptor Lake processors for laptops, as well as the Sapphire Rapids and Emerald Rapids server processors based on the Xeon architecture. These products are important to Intel’s growth in the artificial intelligence market, particularly as more AI processing tasks shift from graphics processors to more cost-effective alternatives, such as those offered by Intel.
The company does not foresee substantial recovery
The explosion at the Kiryat Gat factory has highlighted a long-standing, well-known issue for Intel-one that has persisted for three or even four decades: a heavy reliance on the personal computer (PC) and laptop market, a sector where Intel remains dominant. This market is highly volatile, and recent negative developments there have compounded the tragedy in Kiryat Gat.
For the current quarter, Intel projects revenue of $15-16 billion, down from an original forecast of $17 billion. This is partly due to a shortage of memory chips required for PCs, coupled with rising costs for these components, which in turn drives up the final price of the computers themselves, a dynamic not necessarily tied to Intel’s own operational performance. Consequently, revenue in the PC segment is expected to decline by 20% in the fourth quarter compared with the third. Intel estimates that global PC sales will drop by approximately 12% in 2026 (with a decline of over 20% in the second half of the year) and by about 10% in 2027.
According to Zinsner, the reduction in inventory levels will primarily impact the fourth and first quarters, with a potential, albeit minor, effect on the second quarter as well. Furthermore, the company does not anticipate a meaningful recovery until the supply of memory chips improves and prices stabilize.
The good news
Intel’s reports did also contain some good news: the personal computing segment remains a dominant source of revenue, accounting for 49% of the company’s total, even as revenue in this area declined by 5% year-over-year. Meanwhile, the server chip business-chips that play a role in the AI revolution by supporting simpler AI agents capable of running on processors less expensive than those offered by Nvidia-saw a 78% increase compared with the same quarter last year and a 17% rise over the previous quarter. This segment generated $3 billion in operating profit and contributed 42% of total revenue.
Like other AI-focused companies, Intel acknowledges that the primary factor limiting sales in this sector, unlike in the PC market, is supply, not demand. Intel expects that the entire industry will face supply shortages throughout 2027 and into 2028, and projects that industry-wide sales of server processors will grow by more than 30% in both 2026 and 2027. Intel’s supply remains constrained by silicon wafer yields and a shortage of substrates for advanced packaging. CEO Lip-Bu TanGelsinger admitted he was "disappointed that we were not able to meet strong customer demand in this quarter."
Nevertheless, Intel remains optimistic in this area as well: production costs for the 18A process node have dropped by approximately 40% since the first quarter. In the first quarter, 18A-based PC processors accounted for less than 5% of revenue, whereas today they represent nearly one-third of the company's PC processor revenue.
Published by Globes, Israel business news - en.globes.co.il - on November 1, 2026.
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