Intel’s largest Investment Ever in Israel

The chip giant is negotiating with the Ministry of Finance to invest NIS 40 billion in a new plant in Kiryat Gat in return for a grant of NIS 4 billion from the State.

Intel plans to invest NIS 40 billion (about $ 11 billion) in setting up a new plant in Kiryat Gat, and has asked the state for a 10% grant for this investment. If the plan is realized, it will be the largest investment ever made by the chip giant in Israel. If the company receives the desired construction grant, it could reach NIS 4 billion, also an all-time record.

The discussions between Intel and the Ministry of Finance around the investment began a few weeks ago, led by Finance Ministry Director-General Shai Babad. The negotiations are expected to be completed within a short period of time, but the talks are still underway despite the early elections, and as far as is known, Finance Minister Moshe Kahlon is not directly involved in the discussions. The Ministry of Economy, which was deeply involved in the past in contacts with Intel, has so far not taken part in the negotiations. The treasury and Intel declined to comment on the “Globes” questions on the subject.

Intel’s management has not yet made a final investment decision in Israel, and Intel claims that the plant may be based in Ireland, the US or Israel. But it is not clear whether the opinion referred to macro considerations beyond the clear parameters of the investment, including the effect of such a large increase in Intel’s presence on the dependence of the Israeli economy on American society.

Already, the performance of the economy, and especially the investment data, is significantly affected by Intel’s activity. For example, in his speech at the time of the recent interest rate decision, Governor of the Bank of Israel Prof. Amir Yaron said that the picture of investments in the economy in 2019 could improve “following an investment in a chip processing plant.” Avad also recently hinted that a global company is expected to announce a dramatic investment in Israel soon, which will have an impact on GDP.

Beyond its unprecedented size in absolute numbers, the grant demanded by Intel is relatively higher than the grants it received in the past from the state. Since the last decade, the bonuses given to Intel have been about 5% of the investment under construction. As part of its proposal, the company does not wish to change the current tax arrangement, which was called “the strategic track”, in which Intel pays a reduced corporate tax of 5%. Companies that operate in the periphery benefit from corporate tax of 7.5%, companies from the center of the country 16%, and companies that do not receive the benefit – 23%.