Intel Gets NIS 741m State Grant

Which is a tad under half the amount it had sought

The state has agreed to pay NIS 678 million out of an NIS 10 billion investment by the U.S. chipmaker Intel to upgrade its Kiryat Gat fab.

Intel lab

At the current exchange rate, the NIS 678 million grant is worth about $186 million, less than half of the $400 million it requested.

The grant still requires approval of the Industry, Trade and Labor Ministry's Investment Center and the Knesset Finance Committee.

In exchange for the grant, Intel will commit to increasing the number of employees at the plant by 570, to 3,100 people, and will expand its research and development center in Jerusalem by another 50 employees. The commitments on both sides are for 2011 through 2018.

Intel may also receive another NIS 63 million grant - putting the total sum at NIS 741 million - if it increases its investments in research and development in the periphery or makes further investments in Israeli R&D institutions.

Senior officials from the Finance Ministry and the Industry, Trade and Labor Ministry have been negotiating with Intel for months.

This agreement is a compromise: Intel originally had requested a $400 million grant in return for investing $2.7 billion (close to NIS 10 billion ) in its Kiryat Gat facility, and promised to hire 400 additional workers. Intel had said that without the grant, it would fire many of the current workers in the plant over the next few years.

Senior executives of Intel Israel said on the behalf of the parent company that Intel will make every effort to make its next investments in technology upgrades at its facilities in Israel.

Industry, Trade and Labor Ministry officials reached an initial agreement with Intel for a $200 million grant, half of what the company requested, but Intel would commit to adding only 250 workers in return. In response, the treasury wanted to cut the grant to $110 million.

The government essentially will be paying almost NIS 1.1 million for each of the 620 new jobs created.

In 2005, Intel received a $525 million state grant on its $1.7 billion investment, which provided employment for 2,500. Many of these people work for Intel's suppliers. In 1999, the state gave Intel $600 million for another $1.7 billion investment, which the firm said provided work for some 4,500 people.