Intel to build $25bn factory in largest foreign investment in Israel

Facility in Kiryat Gat is due to open in 2027

JERUSALEM (Reuters) – Intel Corp will build a new factory in Israel worth $25 billion, Prime Minister Benjamin Netanyahu said on Sunday, calling it the largest-ever international investment in the country.

The factory in Kiryat Gat is due to open in 2027 and will employ thousands of people, Israel’s Finance Ministry said, adding that under the deal Intel will pay up a 7.5 per cent tax rate, up from the current 5 per cent.

There was no immediate comment from Intel in Israel.

It means Intel is on an investment spree as it was earlier this week that it plans to invest up to $4.6bn in a new semiconductor assembly and test facility near Wrocław, Poland, as part of a multi-billion-dollar investment drive across Europe to build chip capacity.

The US chipmaker last year announced plans to build a big chip complex in Germany along with facilities in Ireland and France as it seeks to benefit from European Commission's eased funding rules and subsidies as the EU looks to cut its dependence on U.S. and Asian supply.

The facility in Poland will employ 2,000 workers and create several thousand additional jobs during the construction phase and hiring by suppliers, the company said in a statement.

"Poland was just a little bit hungrier to win this site," Intel CEO Pat Gelsinger said in a news conference.

Several countries have been vying to get Intel to invest in their regions and some, like Germany, who have secured a commitment from Intel, have been in talks on the amount of subsidies they can doll out.

Handelsblatt newspaper reported on Thursday that the German government and Intel were close to an agreement for $10.83bn in subsidies.

"We are not asking for handouts, we are asking for competitiveness," Gelsinger said in an interview.

"Labour costs have gone up substantially, material costs have gone up substantially, so all of a sudden, the cost gap was bigger than we had originally estimated."

German Chancellor Olaf Scholz will meet with Gelsinger on Monday, a government spokesperson said in Berlin.

Gelsinger declined to provide detail on the subsidy amount but said he hopes to come to an agreement.

"The gaps are too big. If we close them, we shake hands, and we are going forward," Gelsinger said.

The level of any subsidy offered to Intel by Poland was not made public during Friday's announcement.

Design and planning for the facility will begin immediately, with construction to commence pending European Commission approval.

Mateusz Morawiecki, prime minister of Poland, called Intel's factory "the largest greenfield investment in the history of Poland".

The company, which has been in the country for 30 years and employs 4,000 workers, said it chose Poland because of its infrastructure, and available talent and noted the site is close to its planned factory in Germany and its site in Ireland.

It expects the facility to come online by 2027.

Intel under Gelsinger has been investing billions in building factories across three continents to restore its dominance in chip making and better compete with rivals AMD, Nvidia and Samsung.