(Bloomberg) – Intel Corp. has agreed in principle to building a new manufacturing facility in Israel, part of a push by the US semiconductor giant and its chip rivals to diversify their manufacturing sources.
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The preliminary agreement was announced on Sunday by Israel’s Finance Ministry and Prime Minister Benjamin Netanyahu. Intel confirmed the “company’s intention to expand manufacturing capacity in Israel,” where it already operates, but gave no terms or further details.
According to a person familiar with the plans, who was not authorized to comment publicly, the facility will be for wafer fabrication, a segment in which Israel is already one of Intel’s top four suppliers.
The expansion will support Intel CEO Pat Gelsinger’s efforts to locate more manufacturing outside of Asia, where chip production dominates. He also aims to restore the chip pioneer’s technology leadership after companies like Nvidia Corp. and Taiwan Semiconductor Manufacturing Co. had eclipsed his capabilities.
While Netanyahu valued the deal at $25 billion, which he says is the largest foreign investment in Israel and an “expression of confidence” in the country’s economy, the source said the total added up to an earlier, in 2021 announced investment of 10 billion US dollars.
Read more: Intel and Micron spending spree shows diplomacy bears fruit
According to Israeli officials, the project will add thousands of new jobs to the nearly 12,000 workers currently employed by Intel in the country. The new plant – which is set to complement an existing one in Kiryat Gat, south of Tel Aviv – is expected to start operations by 2027 and remain operational until at least 2035, the ministry said. Under the terms of the agreement, Intel will pay a tax rate of 7.5% in Israel instead of the current 5%.
The story goes on
Sunday’s announcement caps a busy time for the chip industry. Intel on Friday announced a $4.6 billion facility in Wroclaw, Poland. Another US chipmaker, Micron Technology Inc., is close to an agreement to allocate at least $1 billion to set up a semiconductor packaging factory in India, Bloomberg News reported on the same day, citing people familiar with the matter. The development plans highlight the global race to diversify supplies of key components amid US-China tensions.
Read more: Micron on the verge of investing $1 billion in chip packaging plant in India
Companies are also using subsidies from foreign governments to ensure the supply of chips in their own territories is secure and attracts jobs. Under the agreement with Israel, Intel is expected to be eligible for a substantial government grant of 12.8% of its total investment.
The US is providing around $52 billion in stimulus under the Chips and Science Act passed last year. And Europe is making similar efforts. As Bloomberg reported last week, Intel is set to receive nearly $11 billion in subsidies from the German government for a chip manufacturing complex in the east of the country.
The company is also continuing to expand in Leixlip, Ireland, spending an additional €12 billion ($13 billion). There are plans to double the production area there in order to bring the so-called Intel 4 process technology to Europe and offer more foundry services – custom production for other companies. Once this expansion is complete, Intel’s total investment in Ireland will be in excess of €30 billion.
Intel’s Gelsinger is making bold expansion bets at a time when the traditional chipmaker is struggling. The PC market is in the doldrums, and the company’s competitors have entered its lucrative data center territory. Nvidia, whose chips support artificial intelligence, is the star of the semiconductor industry today. After overtaking Intel in market cap in 2020, Nvidia is now worth more than $1 trillion — compared to about $150 billion for Intel.
In Israel, Intel is also working on the acquisition of Tower Semiconductor Ltd. there. to close, a deal announced more than a year ago. Intel anticipates this $5.4 billion transaction to strengthen its position in the chip foundry industry — where TSMC dominates.
Intel has been operating in Israel since 1974, with R&D centers in Haifa, Jerusalem, Yakum and Petah Tikva, and an existing factory in Kiryat Gat, which the company describes as its “most advanced manufacturing facility.” Intel’s Jerusalem facility is the global development center for Mobileye, its autonomous driving business.
Read more: Intel and Micron spending spree shows diplomacy bears fruit
Santa Clara, California-based Intel said its intention to expand is “driven by our commitment to meet future manufacturing needs and to support Intel’s IDM 2.0 strategy, and we appreciate the Israeli government’s continued support.”
The strategy, unveiled after Gelsinger took office in 2021, was touted as an “evolution of Intel’s integrated device manufacturing model” that would transform the company into a provider of foundry capacity in the US and Europe, as well as expanded use of external foundries for some of its foundries Products.
– With support from Debby Wu, Jillian Deutsch and Gwen Ackerman.
(Updates with more on the CEO’s plans in the third paragraph.)
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