Suppliers of the American company Intel, which manufactures chips and processors, in Israel recently received notification of the cancellation of contracts signed with them to supply the equipment and materials necessary to expand the company’s new factory in Israel.
The Ministry of Finance was aware of the company’s decision to stop building the facility, according to what Yedioth Ahronoth newspaper reported today. This comes in light of the continued Israeli aggression on the Gaza Strip, which has entered its ninth month.
The tech giant’s factory expansion, which was officially announced in December 2023, was scheduled to be implemented with an investment of $25 billion. Under the agreement with Israel for the expansion, the company was supposed to receive incentives worth 3.2 billion shekels ($864.77 million).
In return, the company is committed to purchasing products and services worth NIS 60 billion ($16.2 billion) from Israeli suppliers over the next decade.
Intel operates 4 development and production sites in Israel, including its Fab 28 manufacturing plant in Kiryat Gat. The factory produces Intel 7 technology, or 10-nanometer chips.
The factory (Fab 38) was scheduled to open in 2028 and operate until 2035. Intel employs approximately 12,000 people in Israel.
Power plant
Last March, expectations emerged that the Israeli company OBC Energy would establish a power station for Intel in the city of Kiryat Gat with an investment of up to $900 million, and the company headed by Idan Ofer signed a memorandum of understanding with Intel in Israel.
The plant was expected to be built in 2026 and will supply Intel with electricity for 20 years, if the final agreement is signed.
The Israeli website Calcalist reported that many of Intel’s senior executives in Israel have moved to the factory currently being built in the US state of Ohio, as part of an American plan to encourage chip manufacturing factories in the state.
“Israel remains one of our key global production and R&D sites, and we remain committed to the region,” Intel said. “As we said previously, the scope and pace of Intel’s production expansion at the company’s sites around the world depends on several variable factors.”
“Managing a project of this size, especially in our industry, typically involves schedule adjustments,” she added. “Our decisions are based on business conditions, market dynamics, and responsible capital management.”
Senior Finance Ministry officials leading the Intel deal who spoke with Calcalist said there is no planned change in the size of Intel’s investments in Israel nor in the grants the government is expected to transfer to the company.
Calcalist reported that the Israeli Ministry of Finance contacted Intel Israel officials, who explained that the problem arose due to a change in the contract with one of the contractors, anticipating that construction would be rescheduled.
