Intel, plant, lab - 27.7.11
Workers at Intel's Kiryat Gat plant in Israel. Photo by Alberto Denkberg
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Intel should receive a NIS 1 billion grant, Finance Minister Yuval Steinitz and Industry, Trade and Labor Minister Shalom Simhon decided in principle yesterday.

The grant is intended to help Intel invest in two factories. The chipmaker plans to expand its Kiryat Gat factory and to build a new assembly plant in the north, at a total investment of $5 billion.

As a condition for receiving the money, Intel will have to commit to hiring 1,500 more workers at its Kiryat Gat plant, and between 600 and 1,000 workers at its new factory in the north. The Industry, Trade and Labor Ministry hopes the factory will be built near Beit She'an.

In addition, it will be eligible for tax breaks under the newly amended law encouraging capital investment, and will become the first factory to receive special preferential status. Thus, it will pay taxes of 5%, as opposed to the average 12% that it currently pays.

Following the recommendations of a joint industry and trade and finance committee, the ministers decided to break down the grant into three sections. Intel will receive up to NIS 300 million to invest in the Kiryat Gat plant, and another NIS 550 million to build an anchor factory that employs at least 600 workers in the north. It will receive an additional NIS 150 million if that factory employs 1,000 workers.

Intel will be obligated to employ the workers for at least 10 years.

The company will receive the grant money starting in 2014, depending on when it makes the investment.

Two months ago, Intel applied to receive a grant in order to double the capacity of its Kiryat Gat factory, which would enable it to manufacture its most advanced chips. The company also stated that it was considering whether to build a new factory up north.

At the ministers' instruction, a joint committee spent more than two months discussing the requests. The committee was headed by Industry, Trade and Labor Ministry Director General Sharon Kedmi, who worked with Finance Ministry Deputy Budgets Director Eran Polak, the State Revenue Division and the Finance Ministry's economics and research department.

Last year, the state agreed to give Intel a NIS 678 million grant to help cover a NIS 10 billion investment in upgrading the Kiryat Gat factory. In exchange, Intel committed to hiring an extra 570 people there and expanding its Jerusalem research and development center by 50 people.

In that instance, the state ultimately agreed to give Intel half the sum it requested and pushed the company into hiring 220 people more than it had planned. An earlier deal, which called for hiring fewer workers, drew fire due to the high price that the state was paying for each additional work place.