At Israeli Plant, Intel May Create Chip of Future

Company makes formal application for $5.8b expansion of Kiryat Gat production facilities.

Eliahu Hershkovitz

Intel, the United States-based semiconductor producer, officially submitted plans on Sunday to invest 20 billion shekels ($5.8 million) in expanding its production facilities in the southern Israeli town of Kiryat Gat.

Officials from Intel and the government met on Sunday at the Economy Ministry’s Investment Center offices, where the formal submission of Intel’s request for the government grant was made. Investment Center Director Nahum Itzkovich said the center would make efforts to expedite the plans, in an effort to boost job opportunities in the south.

The formal application comes days after Intel, one of the world’s biggest makers of computer chips, announced its plan in principal.

As a major exporter and employer, Intel’s decision to continue to operate and expand in Israel is a major boost for the economy. The company exported $3.8 billion of goods and services last year; employs 9,855 people around the country; runs four research and development centers Haifa, Petah Tikva, Jerusalem and at Kibbutz Yakum, near Netanya; has manufacturing facilities in Kiryat Gat and Jerusalem and purchased some $850 million locally produced goods and services last year alone.

The government has informally promised Intel a grant equal to 5% of whatever the company puts into the project, which would amount to a billion shekels. In return, it expects Intel to expand its workforce by 1,200 employees at a salary cost of between 22,000 and 30,000 shekels a month per employee. This is in addition to the 800 employees Intel took on when it bought an adjacent semiconductor-manufacturing facility owned by Micron, another U.S. company, last September.

According to sources knowledgable about the plans, Intel intends to expand production of the 22-nanometer chips that it is currently producing in Kiryat Gat and at a later stage upgrade to more advanced technology once that technology is in place at a plant that the company is building in Ireland. The Irish plant is based on advanced 14-nanometer technology and the thinking among senior Israeli government officials is that the Kiryat Gat expansion will aim for even more advanced 10-nanometer chips.

The sources said that initial government feasibility studies show that every dollar invested in the project will generate a return of $3 in the form of income tax revenues, $5 in local purchases by the company and a $12 boost to the gross domestic product, mostly in the form of exports.

Intel, which has invested some $10.8 billion in Israel since it began operations in the country in 1974, has received an average of 300 million shekels a year in government grants. Economy Minister Naftali Bennett said the current investment program would ensure that Intel remains in Israel at least until 2030, while Itzkovich called it a clear sign of Intel’s long-term commitment to the country. He said a billion-shekel grant was not out of line as it is at the lowest percentage rate that Intel has received since it began investing in Israel in the 1990s, and involves its largest investment in the country.