Intel Strengthens Global Position with New Manufacturing Plant in Israel

Intel Corp., the US semiconductor giant, has reached a preliminary agreement to construct a new manufacturing plant in Israel, signaling a broader effort by the company and its peers to diversify their production sources.

Intel Corp., the US semiconductor giant, has reached a preliminary agreement to construct a new manufacturing plant in Israel, signaling a broader effort by the company and its peers to diversify their production sources. The deal, announced by Israel’s finance ministry and Prime Minister Benjamin Netanyahu, underscores Intel’s intention to expand its manufacturing capacity in the country, where it is already active. While specific details and terms of the agreement have not been disclosed, the facility will focus on water fabrication, an area in which Israel is already one of Intel’s major providers.

The move aligns with the tech giant’s CEO Pat Gelsinger’s strategy to establish more manufacturing facilities outside of Asia, which currently dominates chip production. Gelsinger is also working to regain Intel’s technological leadership following the rise of competitors like Nvidia Corp. and Taiwan Semiconductor Manufacturing Co. which have surpassed the company’s capabilities.

Although Netanyahu stated that the deal is valued at $25 billion, the figure includes a previous $10 billion investment announced in 2021, according to a source familiar with the matter. The project is expected to generate thousands of new jobs, adding to the approximately 12,000 workers currently employed by Intel in Israel. The new manufacturing plant, located in Kiryat Gat, south of Tel Aviv, is projected to commence operations by 2027 and remain operational until at least 2035.

As part of the agreement, Intel will be subject to a 7.5% tax rate in Israel, an increase from the 5% it currently pays. This move aims to boost the country’s economy while providing incentives for Intel’s investment. The announcement comes at a time of heightened activity in the global chip industry, with Intel unveiling a $4.6 billion facility in Wroclaw, Poland, and Micron Technology Inc. reportedly close to an agreement to invest at least $1 billion in a semiconductor packaging factory in India.

Chipmakers are actively seeking to diversify their supply chains and take advantage of government subsidies to ensure stable ship supplies and create job opportunities. Intel is likely to be eligible for a significant government grant representing 12.8% of its total investment as part of its agreement with Israel. Meanwhile, the US government is offering approximately $52 billion in incentives under the Chips and Science Act, while Europe is also making efforts to attract chip manufacturing with significant subsidies.

In addition to its expansion in Israel, the US giant is investing heavily in other regions. The company is expanding its operations in Leixlip, Ireland, with an additional expenditure of 12 billion euros ($13 billion) to support the introduction of Intel 4 process technology and offer more foundry services. CEO Pat Gelsinger, is pursuing ambitious expansion plans amidst the company’s challenges in the competitive chip market. While the personal computer market is experiencing a downturn and rivals are encroaching on Intel’s data center dominance, Nvidia has emerged as a major player in the industry.

In Israel, Intel is also in the process of acquiring Tower Semiconductor Ltd., a deal that was announced over a year ago. This acquisition, valued at $5.4 billion, is expected to strengthen Intel’s position in the chip foundry industry, where Taiwan Semiconductor Manufacturing Co. (TSMC) currently holds a dominant position.

Intel has had its operations in Israel since 1974 and has research and development centers in various cities, including Jerusalem, Yakum, Haifa, and Petah Tikva. The company’s existing facility in Kiryat Gat is considered its most advanced manufacturing facility, while its Jerusalem facility serves as the global development center for Mobileye, Intel’s autonomous driving business. The company’s decision to expand its operations in Israel aligns with its commitment to meeting future manufacturing needs and supporting its IDM 2.0 (Integrated Device Manufacturing) strategy.

The company appreciates the continued support of the Israeli government as it works towards these goals. Under Gelsinger’s leadership, Intel aims to become a provider of foundry capacity in the US and Europe, while also leveraging external foundries for certain products, marking an evolution of its manufacturing model.