Intel accepts high interest rates, large subsidies when investing in chips in Israel

The news comes as Israel remains locked in a war with the Palestinian militant group Hamas. The move also reflects the US tech giant’s strong support and the Israeli government ’s “generous” offer at a time when Washington is increasing pressure on Tel Alviv to take further steps to minimize civilian casualties in Gaza.

Intel has been present in Israel since 1974.

Intel plans to expand its Kiryat Gat manufacturing site, where it has a chip factory 42 kilometers from Hamas-controlled Gaza.

The US company sees this as “an important part of Intel’s efforts to foster a more resilient global supply chain.” It is also the largest foreign investment in Israel to date.

Ofir Yosefi, deputy director general of the Israel Investment Authority, said Intel chose a high subsidy rate with a corresponding corporate tax rate, rather than a low subsidy and a low tax rate. Specifically, Intel will have to pay a tax of 7.5% compared to 5.5%.

In addition to the funding of up to 12.8% of the total investment, the chipmaker also pledged to purchase goods and services worth 60 billion shekels ($16.6 billion) from Israeli suppliers over the next 10 years.

Under CEO Pat Gelsinger, Intel is pouring billions of dollars into building semiconductor factories across three continents, aiming to restore its chipmaking dominance and better compete with rivals AMD, Nvidia and Samsung.

In Germany, Intel plans to spend more than 30 billion euros ($33 billion) to develop two chip factories in Magdeburg, part of an investment drive to build chip capacity in Europe. Berlin has pledged huge subsidies to attract the largest foreign investment ever to the country.

Last year, Intel said it would invest up to $100 billion to build the world's largest chip manufacturing complex in Ohio, as rivals Samsung and TSMC also announced major investment plans in the US.

Intel, one of around 500 multinational companies in Israel, has been present here since 1974 and currently operates four development and manufacturing sites, including a manufacturing plant in Kiryat Gat called Fab 28, which produces 10-nanometer chip technology. The US company has nearly 12,000 employees here and indirectly employs 42,000 people.

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