December 1, 2005

Intel to Build $3.5 Billion Plant in Israel

TEL AVIV -- Intel Corp. will build a chip plant in Israel costing more than $3.5 billion, the U.S. company said on Thursday, the largest investment ever by an industrial firm in the country.

Intel's second plant in the southern town of Kiryat Gat will add to an Israeli economy already driven by high-tech and exports.

The new plant will produce 300 mm wafers using 45 nanometer process technology starting in the second half of 2008. This will allow the company to make its chips smaller and more powerful by squeezing on more transistors.

The plant will also be Intel's second 45 nanometer factory in the world -- the first is being built in Arizona in the southwest United States, expected to come on line in late 2007.

"At over $3.5 billion this will be our largest investment in Israel and one of our largest anywhere in the world," said Tom Franz, an Intel manufacturing general manager.

He described $3.5 billion as a conservative estimate. "It could get to $4 billion," he told Reuters after a news conference.

The 45 nanometer technology will allow chip circuitry to be built at about half the size of today's standard 90 nanometers.

Alex Kornhauser, general manager of Intel Israel, said the government had approved a grant of $525 million for the new facility. Intel's $600 million upgrade of its existing plant in Kiryat Gat will receive government tax incentives.

Construction on the new plant will begin immediately. Thursday's announcement confirms one made in July by Prime Minister Ariel Sharon, who had said the company would invest around $4 billion.


Intel said the project will create more than 2,000 jobs at Kiryat Gat, already the site of a facility that employs about 3,500 people.

"Intel is committed to widening its lead in advanced semiconductor manufacturing," Intel President and Chief Executive Paul Otellini said in a statement.

Kornhauser said the new plant will export $3 billion a year when it reaches full production capacity, which is expected within one and a half to two years after it begins operating.

This will boost Israel's gross domestic product by about 2 percent, he added.

The world's top chipmaker, whose processors power an estimated 80 percent of personal computers, reported exports from Israel of $1.17 billion in 2004. Its exports peaked at $2.02 billion in 2002.

The company accounted for 9 percent of Israel's total electronics and information technology exports in 2004. Centrino mobile technology was developed in Israel.

In 1999, Intel -- active in Israel for 30 years -- built its plant in Kiryat Gat with a total investment of $1.6 billion, including government subsidies.

Franz said Intel decided to build its new plant in Israel because it already had a large presence in the country with an established work force and the government agreed to provide financial incentives.

Manufacturing with 300 mm wafers (about 12 inches in diameter) significantly increases the ability to produce semiconductors at a lower cost compared with more commonly used 200 mm wafers. The technology consumes 40 percent less energy and water per chip, Intel said.