Israel wins Intel's 10nm fab contest – unless it hasn't

An announcement by Intel that it was spending $6bn to upgrade its Kiryat Gat plant was greeted with joy in Israel, and skepticism elsewhere.
Written by David Shamah, Contributor
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Inside the cleanroom in Intel's Kiryat Gat fabrication plant. Image: Intel

With the announcement on Wednesday that it will invest as much as $6bn to upgrade its Kiryat Gat fab, it looks like the drama that has gripped Intel for the past two years as it decided where it would build its 10 nanometre fabrication facility is officially over.

Unless, of course, the Israelis "are simply bluffing," as the Irish Independent website put it.

Intel will be upgrading its main Israeli chip manufacturing facility, the company announced this week.

No details were released on what the upgrade plan will entail or how much money will be involved, but reports in the Israeli media — based on sources inside the company — said that the upgrade would allow the facility to manufacture 10nm chips, the chips that will feature in the new wearable technology, Internet of Things, and perceptual computing devices that Intel sees a big future in. According to those sources, Intel will invest $6bn in the upgrade.

Although the details are still secret, the Israeli government officials in a position to know more than most were in a very celebratory mood. Finance minister Yair Lapid called the decision "an expression of faith in Israel's economy", adding these investments will create thousands of jobs directly for Intel, and tens of thousands of jobs in the rest of the economy".

Economics minister Naftali Bennett said: "We competed with the whole world and Intel chose us. This is the best birthday present the country could get," with the announcement coming days before Israel's 66th Independence Day. And prime minister Benjamin Netanyahu himself said that the announcement was "the culmination of a process we have been working on for several years".

During those several years, Intel was said to be trying to decide where to build the 10nm plant — in Israel or Ireland, with the plant seen as one of the main production facilities for Intel chips in the coming years.

The two countries have been lobbying for Intel's business, offering incentives and tax breaks — as would be expected, said Mooly Eden, Intel 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 said.

"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, and in fact there was speculation that it was Ireland that Intel had chosen for the 10nm plant, after the company announced in March that it had spent about $5bn upgrading its Leixlip facility over the past several years.

But that announcement was not greeted with the same enthusiasm that the Intel Israel announcement was by Israeli government officials. Which, according to Irish observers quoted in the Independent's website, could mean one of three things: either Israel had indeed won, or that Intel was going to upgrade both plants for 10nm production — after all, there are a lot of things that need to be outfitted with chips in order to be a part of the Internet of Things — or, that the Israelis are bluffing.

"Israeli ministers are known for over-egging these announcements," the site said. "And, after the big performance of Intel Israel's biggest rival [Intel Ireland] in March, authorities there were anxious to get their own bit of good news out. It is possible that the investment sum is for less than was announced."

A spokesperson for Intel Israel refused to comment. "You know we can't talk about things like that," he said. "We are all just going to have to be patient. All will be revealed in good time."

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