Dei'ah veDibur - Information & Insight

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20 Tammuz 5765 - July 27, 2005 | Mordecai Plaut, director Published Weekly










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Intel to Build in Kiryat Gat

by Yated Ne'eman Staff

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 five years.

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 5,400 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.


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