The Israeli government has struck an agreement to provide Intel Corp with a $3.2 billion grant for the construction of its new $25 billion chip plant in the southern part of the country.
"The global company Intel's choice to approve the unprecedented investment of $25 billion right here, in Israel, is important and significant," Finance Minister Betzalel Smotrich said in a joint statement with the Economy Ministry and Israel Tax Authority, according to Reuters.
Intel, a leading US multinational, is one of the world's largest semiconductor manufacturers.
Israel has agreed to disburse the grant money over several years. In return, Intel pledges to hire numerous high-tech workers in Israel, as well as engage in significant transactions with local companies and contractors.
Under CEO Pat Gelsinger, Intel has invested billions in building factories across three continents to restore its dominance in chip-making and better compete with rivals AMD, Nvidia, and Samsung. The new Israeli plant is the latest investment by the US chipmaker in recent years.
"Support from the Israel government will ... ensure that Israel remains a global centre of semiconductor technology and talent," Intel vice president Daniel Benatar said.
Intel has received around $2 billion in the past 50 years in Israeli grants for other facilities there. Ofir Yosefi, deputy director-general of Israel's Investments Authority, said Intel chose a higher grant and tax rate over an offer for a lower grant and lower tax rate.
According to Reuters, the process took months since a grant of such magnitude needed a review and independent analysis of its economic viability. It was determined Israel would reap much higher fiscal and economic benefits, he added.
"This investment, at a time when Israel wages war against utter wickedness, a war in which good must defeat evil, is an investment in the right and righteous values that spell progress for humanity," Smotrich said.
Intel, whose investment will be over five years, will pay a corporate tax rate of 7.5 per cent instead of 5 per cent previously. The normal tax rate is 23 per cent, but under Israel's law to encourage investment in development areas, companies receive large benefits.
In Germany, the firm plans to spend more than 30 billion euros ($33 billion) to develop two chip-making plants in the country's Magdeburg, as part of a multi-billion-dollar investment drive across Europe to build chip capacity. Berlin has pledged big subsidies to attract Germany's biggest-ever foreign investment.
In 2022, Intel said it would invest up to $100 billion to build potentially the world's largest chip-making complex in Ohio, and rivals Samsung and Taiwan Semiconductor Manufacturing Co or TSMC also have announced big investment plans in the US.
In addition to the grant that amounts to 12.8 per cent of the total investment, the chipmaker is also committed to buying 60 billion shekels ($16.6 billion) worth of goods and services from Israeli suppliers over the next decade.
Intel, one of around 500 multinationals in Israel, established a presence there in 1974 and now operates four development and production sites, including its manufacturing plant in Kiryat Gat called Fab 28 which produces Intel 7 technology, or 10-nanometre chips.
It employs nearly 12,000 people in the country while indirectly employing another 42,000 more.
At some $9 billion, Intel's exports account for 5.5 per cent of total high-tech exports. The Centrino chip, which enables WiFi, and its Core processors were developed in Israel.
Intel, which bought Israeli self-driving auto technologies firm Mobileye for $15.3 billion in 2017, declined to say what technology will be produced at the new Fab 38 plant the construction of which has begun.
Anticipated to commence operations in 2028, the new factory will be under Intel's management until at least 2035.
As per Statista, Intel processors made up 69.3 per cent of laptop central processing units (CPUs) test benchmark results in the fourth quarter of 2023, down from the higher share seen in previous quarters.
AMD processors accounted for 22.7 per cent of laptop CPUs detected via the tests.
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