The company has been there since 1974 with research and development centers and a chip factory and plans to build a new factory.

Israel’s Finance Ministry and Prime Minister Benjamin Netanyahu announced the initial agreement on Sunday. Intel confirmed the company’s “intent to increase manufacturing capacity in Israel” where it is already located, but did not specify the terms or provide other details.

The facility will be for chip manufacturing, a sector in which Israel is already one of four major suppliers to Intel, according to a person familiar with the plans, who is not authorized to speak publicly.

regain leadership

The expansion reinforces efforts by Pat Gelsinger, chief executive of Intel, to build more manufacturing facilities outside Asia, which dominates chip production. He is also striving to regain the company’s technology leadership after it was overtaken by companies such as Nvidia Corp and Taiwan Semiconductor Manufacturing Co.

Intel is moving to restore the luster of electronic chip production

While Netanyahu valued the deal at $25 billion, which he said was the largest foreign investment in Israel and an “expression of confidence” in the country’s economy, the person inside said the total amount includes a previous $10 billion investment announced in 2021.

According to Israeli officials, the project will add thousands of jobs to the nearly 12,000 employees currently employed by Intel in the country. The ministry said the new factory is scheduled to start operating by 2027, and to remain active until at least 2035. The existing factory is located in Kiryat Gat, south of Tel Aviv. As part of the agreement, Intel will pay taxes of 7.5% in Israel instead of the current 5%.

A global race to diversify

Sunday’s announcement caps a busy period for the chip industry. Intel on Friday announced the construction of a $4.6 billion factory in Wroclaw, Poland. On the same day, Bloomberg reported, citing people familiar with the matter, that another US chip maker, Micron Technology, was close to reaching an agreement to allocate at least $1 billion to build a semiconductor packaging plant in India. The development plans highlight the race globally to diversify supplies of critical ingredients amid US tensions with China.

Companies also benefit from subsidies from foreign governments keen to secure chip supply at home and attract jobs. Within the framework of the agreement with Israel, Intel is likely to be eligible for a large government grant estimated at 12.8% of its total investment in the country.

The UK is considering investing £1 billion in the chip sector

As for the United States, it provides incentives of about $52 billion in the Chips and Science Act that passed last year. Europe is also creating a similar effort. Also, Intel will receive about $11 billion in subsidies from the German government for establishing a chip manufacturing complex in the east of the country, Bloomberg reported last week.

A bold bet on expansion

The company also continues to expand in Leixlip, Ireland, spending an additional €12 billion ($13 billion) as Intel plans to double its manufacturing space there, bring new processor manufacturing technology called Intel 4 to Europe, and provide more workshop services. Production for other companies.

Once the expansion is complete, Intel’s total investment in Ireland will be more than €30 billion.

Intel’s plan to inject $20 billion into the chip industry is putting pressure on the shares of its competitors

Under Gelsinger’s leadership, Intel is betting boldly on expansion at a time when the chipmaker is grappling with a stagnant PC market, which has pushed incumbents into the lucrative data center market, and now NVIDIA whose chips help power Artificial intelligence computing, shining in the field of semiconductor industry.

After overtaking Intel by market capitalization in 2020, NVIDIA is now valued at more than $1 trillion versus about $150 billion for Intel.

History of “Intel” in Israel

In Israel, Intel is also working to complete the acquisition of the country’s Tower Semiconductor Ltd, a deal announced more than a year ago.

Intel is counting on the $5.4 billion deal to help cement its position in the chip industry – where the Taiwan Semiconductor Manufacturer is dominant.

Intel has been operating in Israel since 1974 and has R&D centers in Haifa, Jerusalem, Yakum, and Petah Tikva, as well as an existing factory in Kiryat Gat, which the company calls its “most advanced manufacturing facility.” Intel’s Jerusalem facility is the global development center for Mobileye, the company’s self-driving technology development arm.

Infographic: Global semiconductor production competition is concentrated between three countries

The company, “Intel”, headquartered in Santa Clara, California, said that its intent to expand “is driven by our commitment to meeting future manufacturing needs and supporting the (Intel 2) integrated device manufacturing strategy, and we appreciate the continued support provided by the Israeli government.”

The company has touted the strategy, which was unveiled after Gelsinger took the helm in 2021, as an “evolution of (Intel’s) integrated hardware manufacturing model” that would see the company a supplier of manufacturing capabilities in the United States and Europe, as well as expand its use of its overseas workshops to support some its products.