Intel Invests $25bn In Israel Chip Plant

Intel has agreed “in principle” to invest a total of about $25 billion (£20bn) to build a new chip manufacturing plant in Israel, amidst a drive by chipmakers and governments to diversify production following disruption during the period of Covid-19 lockdowns.

Israel prime minister Benjamin Netanyahu announced the deal on Sunday, and Intel confirmed it had “submitted a business plan to upgrade its manufacturing facilities in Israel”, where it has operated since 1974, without giving details.

The company announced a first investment of $10bn into the project in 2021, making the latest boost worth $15bn.

Netanyahu said the new plant in Kiryat Gat, where Intel has an existing plant, would be “the largest investment ever” in Israel.

‘Confidence’

He added that the investment was an “expression of great confidence in the Israeli economy” that “exactly reflects the strength of the free economy that we have built here and the technological economy that we are developing”.

The Israeli finance ministry said the project is expected to employ thousands of staff in addition to the nearly 12,000 already employed by Intel in the country.

The plant is scheduled to begin operations in 2027 and continue manufacturing until at least 2035, the ministry said.

As part of the agreement Intel is to pay a 7.5 percent tax rate in Israel instead of the 5 percent it currently pays.

Domestic chaos

Since Netanyahu’s controversial government introduced plans to overhaul the judiciary earlier this year the country has seen weekly protests involving hundreds of thousands of people, with the country’s tech company leaders amongst the most vocal critics of the plan.

Netanyahu has played down the possible impact of the reforms on the economy, but the head of Israel’s central bank said last month the controversy had created a “significant domestic [economic] shock”, while the Israel Innovation Authority said in May there had been a “significant increase” in Israeli start-ups registering abroad rather than in Israel.

Governments including the US and the EU are offering tens of billions in incentives to chipmakers to locate facilities outiside of Asia in order to protect supply chain stability.

Intel is in talks in Germany over a planned 20bn euro (£17bn) plant in Magdeburg and is investing more than $50bn for new or expanded sites in Ohio, Arizona and Ireland.

Diversification

Last week it said it was investing $4.6bn in a semiconductor assembly and testing plant in Poland and is discussing a similar project in Italy.

The plans come as Intel suffers from a cyclical downturn in demand for personal comptuers that has affected its revenues.

In the meantime competitor Nvidia has surged ahead on a wave of investor enthusiasm for the AI accelerator chips the company makes, a market in which it is estimated to have a share of up to 95 percent.

That has seen Nvidia’s market capitalisation rise recently to more than $1tn, compared to Intel’s $150bn.