Intel to spend $25bn on Israel chip plant upgrade, says Netanyahu

Intel has agreed “in principle” to invest approximately $25bn in a new chipmaking factory in Israel, prime minister Benjamin Netanyahu said on Sunday.

The US semiconductor group said it had “submitted a business plan to upgrade its manufacturing facilities in Israel”, where it has operated since 1974, but declined to confirm “specific details of the project”.

Intel announced a first, $10bn phase of the expansion plan two years ago, making the extra $15bn commitment the latest in a string of giant projects designed to boost Intel’s manufacturing footprint after a period of under-investment and make it more competitive with Taiwan’s TSMC.

Netanyahu said the new factory in Kiryat Gat, where Intel already has a facility, would be “the largest investment ever” in Israel.

Intel is in talks with Germany over increasing the subsidies for a €20bn plant in Magdeburg and has also announced investments of more than $50bn to build new sites or expand existing manufacturing facilities in Ohio, Arizona and Ireland. Last week it said it would build a $4.6bn semiconductor assembly and testing plant in Poland and is in discussions about building a similar plant in Italy.

The wave of new facilities comes at a time when Intel has suffered a severe cyclical collapse in demand, putting a strain on its finances. It also faces questions about whether it can move fast enough with new manufacturing processes and chip designs to cash in on the soaring chip demand from AI.

The company has already signalled it may push back some of its investment, saying it is only moving ahead with constructing the buildings for its new facilities and is holding back on the more expensive work of equipping them until it is sure when demand will rebound.

“Our intention to expand manufacturing capacity in Israel is driven by our commitment to meeting future manufacturing needs . . . and we appreciate the continued support of the Israeli government,” Intel said in a statement.

Since Netanyahu’s far-right government unveiled controversial plans to overhaul the judiciary earlier this year, hundreds of thousands of Israelis have taken part in weekly protests, with leaders from the booming tech sector among the most vocal critics of the proposals.

The head of the Israel’s central bank warned last month that the fight over the overhaul had delivered a “significant domestic shock” to the economy. Meanwhile, the Israel Innovation Authority warned in May that there had been “a significant increase” in the number of Israeli start-ups registering abroad rather than in Israel.

Netanyahu has consistently played down fears over the economic impact of the judicial overhaul and said on Sunday that the planned investment by Intel was an “expression of great confidence in the Israeli economy”.

“[It] exactly reflects the strength of the free economy that we have built here and the technological economy that we are developing,” he said.

The Israeli finance ministry said the project was expected to employ thousands of new workers. It added that as part of the deal, Intel would pay a local tax rate of 7.5 per cent, up from its current 5 per cent.