Intel Delaying Construction of New Israeli Semiconductor Plant

Local suppliers say U.S. company is seeking to reduce costs by putting off development amid a tough global business environment

An Intel logo is seen at the company's offices in Petah Tikva, near Tel Aviv, Israel.
\ NIR ELIAS/ REUTERS

Intel’s plans to build a new 40-billion shekel ($11 billion) semiconductor plant in Kiryat Gat are apparently going to be delayed for up to a year as its new CEO seeks to cut short-term costs.

Local suppliers said they had been informed of the delay. They attributed it to a difficult global business environment for the company. As a result, CEO Robert Swan – who took over in January and is visiting Israel this week – has been seeking to cut short-term costs.

In a statement, Intel declined to directly confirm the report but noted that business conditions could affect the rollout of major investment projects.

“Intel presented a business plan to the [Israeli government’s] Investments Center in January and since then has provided no updates about new projects,” the company said. “As was communicated in an announcement of Global Production Manager Ann Kelleher in December 2018, every investment is done in stages and there can always be adjustments, depending on business, financial and other needs.”

In April, Intel said it expected full year revenue of $69 billion lower than Wall Street expectations for more than $71 billion and a drop from 2018’s $70.8 billion in 2018. Intel is exiting the 5G smartphone market and has said it’s assessing its future in so-called internet of things devices.

Monday’s statement added that “Intel is committed to Israel and continue to invest there” and a day earlier the company unveiled a project to help startups in Israel develop technologies in artificial intelligence and autonomous systems.

The 20-week program, called Ignite, will offer business and technical support to up to 15 local companies, Intel said.

Intel, which started operations in Israel in 1974, is a critical player in Israel’s high-tech industry. It is the country’s largest private sector employer, with some 12,000 staff, and unusually for a foreign tech company its local operations include both manufacturing and research and development.

In 2017, Intel deepened its presence in Israel by spending $15.3 billion to buy Jerusalem-based Mobileye, a maker of self-driving auto technologies, for $15.3 billion.

Work on the new plant, which will occupy a 75-acre plot just south of an existing Intel facility, was supposed to begin at the start of this year and take five years to complete. After winning government assistance of about 3.8 billion shekels, Intel has committed to adding another 1,000 to 2,000 new jobs at the new plant.

Intel’s existing plant in Israel, which is being enlarged, is supposed to be producing 10-nanometer chips, a technology the company has had difficulty with. It announced its first chips – called Ice Lake and developed in Israel – only last month and only for limited applications.

Media reports say 10-nanometer chips for desktop computers will only become available from the company in 2022.

“They are still having problems with the technology. They haven’t succeeded in stabilizing the production process for the 10 nanometers. They are making the chips but not in big enough quantities,” said an industry source, who asked not to be named.