Jerusalem is softening its position on subsidizing Intel in Israel: to receive a government grant, the chipmaker may build either another R&D facility in the unemployment-stricken north or a full-blown assembly plant. The government had previously stipulated an assembly plant.

An Intel R&D center would employ hundreds of engineers, while an assembly plant would employ as many as 1,000 people.

Intel operates extensively in Israel and has been seeking a site for its next big plant, but not necessarily here. Six months ago the Israeli government offered the U.S.-based company a billion-shekel grant to build an assembly plant. How much money might be proffered if the company builds an R&D center instead remains to be seen.

Intel already has an R&D center in Israel, in Haifa, which has several hundred employees.

The Finance Ministry said negotiations with Intel continue. The company clarified to the ministry that because of the global economic uncertainties, it is delaying a final decision on where to build its next assembly plant, according to ministry sources.

In July, Finance Minister Yuval Steinitz and Industry Minister Shalom Simhon announced they had approved the billion-shekel grant for Intel, as part of a NIS 5 billion investment by the company in Israel.