Intel, the company which makes the computer brains for most
of the personal computers in the world, will build a second
factory in Kiryat Gat for $4 billion, Intel CEO Dr. Craig
Barrett told Prime Minister Ariel Sharon on Sunday. The fab,
to be known within Intel as "Fab 28," will create 2,000 jobs
directly, and 2,000 indirectly. Prime Minister Sharon, who
announced the decision at Sunday's Cabinet meeting, said, "I
see this decision as a declaration of complete confidence in
the stability and strength of the Israeli economy." Intel has
not announced the decision publicly yet.
The Ministry of Industry, Trade and Labor said that the
government had agreed to provide Intel with a grant of $525
million, or "15 percent for the first $3.5 billion the
company spends," to build the plant. The ministry said that
the government hopes to approve the funding by the end of the
year. Once approved, Intel will have to build the Fab within
The government originally offered Intel a grant for 12.5
percent of the investment, while Intel was asking for 20
percent. Ireland was also competing as a site for the plant,
but it was only willing to offer 12.5 percent. Israel
eventually decided to raise its participation.
The project will be Intel's third plant in Israel and will be
built next to its established Kiryat Gat factory which the
company opened in 1999. In a separate project the Kiryat Gat
factory is currently being upgraded at a cost of $666 million
that is being borne entirely by Intel. Intel will, however,
receive tax breaks in connection with that investment.
The company also has a plant in Jerusalem and research
centers in Yakum, Jerusalem and Petach Tikva. It employs
people in Israel out of a total of 85,000 worldwide.
The factory in Jerusalem was its first in Israel. It
originally wanted to build its second factory near the first,
but Jerusalem officials, especially the current mayor Rabbi
Lupoliansky, opposed its construction there, so a site in
Kiryat Gat was found.
Many people questioned the enormous investment. For example,
Israel gave a grant of $350 million for construction of the
Kiryat Gat plant.
However Globes correspondent Ofer Levi wrote that
Israel has so far invested a total of $800 million in the two
Intel plants, and it has proven to be a very good deal.
According to figures compiled by the Gartner Group, Intel
Israel has generated $12 billion in sales and has created a
secondary market of 60 companies founded by former Intel
employees which have generated another $1 billion in revenue.
The presence of Intel in Israel has also encouraged other
companies to come to Israel which have generated another $1
billion in activity.
Levi also notes that building a factory for an established
company creates an almost certain return, in contrast to
investing in startups whose future is much less certain.