Netanyahu to Intel: Want Money? Promise to Stay in Israel

In exchange for the state's financial support, Intel Israel undertook to provide 400 new jobs.

If Intel Israel wants to get the $400 million grant it has requested from the State of Israel, it must undertake to stay in the country for a long time.

Intel Israel recently applied to the Ministry of Industry, Trade and Labor for the grant, to help pay for a $2-billion upgrade to its chip-manufacturing facility in Migdal Haemek. In exchange for the state's support, Intel Israel undertook to provide 400 new jobs.

There is no final word on the chip giant's request, which is still being studied by the ministry's Investments Center. Due to the sheer magnitude of the grant that Intel Israel is seeking - in effect, $1 million for every new job created - the Investments Center's recommendation will be passed on to Prime Minister Benjamin Netanyahu himself at a later stage.

In the past Intel Israel received grants of similar dimensions, but then it created thousands of jobs, not a mere few hundred.

One of the demands that state officials made during negotiations with Intel Israel is that in exchange for the gargantuan amount the company retool the factory so that it can make two new generations of chips, not just one, and production can continue for longer.

In any case ministry figures suspect that if the grant is refused Intel may well scale down its activity in Israel, possibly even leaving the country altogether.

At present Intel employs 2,300 people in Israel.

One snag that Netanyahu will have to overcome if he approves the grant is the Finance Ministry's consistent opposition to any grant.

When the issue of expanding the Kiryat Gat facility first came up, six months ago, Finance Ministry officials made it clear that a grant was out of the question. Instead, they suggested tax breaks, including an exemption from income tax and tax on dividends for a period of 10 years. Finance Minister Yuval Steinitz even directed the treasury team to examine what tax breaks Intel might be eligible for in order to render its new investment economically feasible for it. Officials at the Tax Authority have been in touch with Intel to look at tax-related alternatives to a grant.

Finance Ministry figures say that nothing has changed in their attitude toward giving money to Intel Israel.

Over the years the chip giant's Israeli teams have had significant successes. Intel Israel was responsible for the invention of the Pentium processors, which had been code-named "Dothan" during development, after the ancient Israelite town. Based (in several generational leaps) on the Pentium processor, the Israeli team was also responsible for the Intel Core Microarchitecture, a multi-core processor microarchitecture unveiled by Intel in early 2006. The new system, with a power-saving design, necessitated persuading Intel management to adopt a new paradigm: that clock speed was not necessarily paramount, and that heat generation had become a key issue.