Israeli Treasury Cancels NIS 1.3 Billion Intel Grant Amid Factory Expansion Freeze

The Israeli Ministry of Finance has canceled a NIS 1.3 billion grant to Intel following a two-year freeze on the expansion of its chip factory in Kiryat Gat. This decision comes amid Intel's ongoing financial difficulties, which have also led to the cancellation of factory projects in Germany and Poland. The grant was initially promised in 2023 as part of a government commitment to support Intel's planned expansion of its Kiryat Gat facility, which produces advanced 10-nanometer chips known as "Intel 7" and plays a key role in the company's global AI manufacturing efforts.

Despite the factory's strategic importance and the appointment of Danny Ben Atar, who led the Kiryat Gat plant's development, to a senior global role, the expansion project has been stalled since June 2024. The government had pledged a total of NIS 11.1 billion in grants for Intel's new cleanroom construction near the existing plant, with a total investment budget of NIS 89 billion. The grant rate was increased to 12.5% of the total investment, and Intel was allowed a reduced corporate tax rate of 7.5% on its southern Israel revenues.

While the NIS 1.3 billion grant scheduled for 2025 has been canceled, the Ministry of Finance is maintaining the NIS 1.06 billion grant planned for 2026, contingent on Intel resuming investment. Intel has confirmed that its expansion plans in Israel are under review to align with customer demand. Meanwhile, Intel has continued investing in its more advanced Irish plant, receiving a new €5 billion investment for 5-nanometer chip production. Intel also received a NIS 1.5 billion grant for its 2024 operations in Israel. The Ministry of Finance stated it is acting in accordance with the agreement between the State of Israel and Intel.

The freeze and grant cancellation reflect broader challenges Intel faces globally and regionally, including geopolitical tensions in the Middle East and shifting corporate strategies.