$6bn upgrade deal set to bring Intel's 10nm project to Israel

A long-running drama seems to have been resolved, with Kiryat Gat likely to be where Intel's new chips are manufactured.

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Inside the cleanroom in Intel's Kiryat Gat fabrication plant. Image: Intel

The Israeli government announced on Monday that it has approved a plan submitted by Intel last April to upgrade its Kiryat Gat fabrication plant — likely putting to an end the long-running drama of where the company would manufacture its new 10mm chips.

The chips are seen as crucial to Intel, as they will feature in the wearable, Internet of Things, and Perceptual Computing devices that Intel sees a big future in.

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Monday's announcement constitutes the Israeli government's response to a proposal submitted by Intel to spend $6bn to upgrade the Kiryat Gat plant. No details were given by Intel on what the upgrade would entail, and the company hasn't yet commented on the Monday announcement, although an source said that the deal means that it is "practically a sure thing" that Intel will officially announce it is manufacturing the 10nm chips in Israel in the coming days.

Although the announcement did not contain any details of exactly what Intel would be doing at the plant, it said the upgrade would turn the fab into "the world's most advanced technology for the production of micro-electronic components".

The deal is a good one for both Intel and Israel, the country's finance minister Yair Lapid said in the announcement. Intel gets grants of up to $600m and a substantial discount on corporate tax rates over the next decade. In return, Intel promises to hire an additional 1,000 workers, and spend hundreds of millions of dollars on products and services. Whatever Israel loses in the taxes and grants, said Lapid, it would make up in the enhanced economic activity Intel's upgrade will provide.

Intel, according to sources, has been of two minds on where to build the 10nm plant – in Israel or Ireland. The two countries have been lobbying for Intel's business, offering incentives and tax breaks – as would be expected, said Mooly Eden, Intel's international SVP and CEO of Intel Israel. At an event in Tel Aviv earlier this year, Eden said that both governments "know how the game is played. In today's world, this is how governments bring jobs in".

As an Israeli, Eden, of course, would prefer to see the plant in Israel, but for Intel the decision was purely economic. That said, the investment made sense for the government, Eden added. "Israel gets back a lot more from Intel that it does from other multinationals. Over the years Intel has invested $10.8bn in Israel. Taking into account all of the services and outside contractors we use, Intel's activities on Israel is responsible, in our estimation, for some 30,000 jobs in the Israeli economy."

The competition between Israel and Ireland for the new plant has been conducted in a very gentlemanly fashion, with no name-calling or the like, and in fact there was speculation that it was Ireland that Intel had chosen for the 10nm plant, after the company announced that it had spent about $5bn upgrading its Leixlip facility over the past several years.

Intel did not make its own announcement on Monday, but an Intel spokesperson said that the company would have something to say about it "when it is appropriate."

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