Israeli Treasury Cancels 1.3 Billion Shekel Intel Grant Amid Expansion Freeze

The Israeli Ministry of Finance has decided to cancel a 1.3 billion shekel grant to Intel following a two-year freeze on the expansion of its chip manufacturing plant in Kiryat Gat. This decision comes amid Intel's financial difficulties, which have also led to the cancellation of factory projects in Germany and Poland. The freeze affects the planned construction of two clean rooms at the Kiryat Gat facility, which is the only Intel plant worldwide producing 10-nanometer chips, known as Intel 7 technology.

Intel's Kiryat Gat plant is considered a leader in global AI chip production, and Danny Ben Atar, who led the plant's development, was promoted to co-CEO of Intel's global manufacturing network. Despite this, the expansion project has been halted since June 2024, with no new timeline announced. Meanwhile, Intel has invested 5 billion euros in upgrading its more advanced 5-nanometer chip production facility in Ireland.

The Israeli government had initially committed 11.1 billion shekels in grants to Intel in 2023, including a 12.5% subsidy on total investment and a reduced corporate tax rate of 7.5% for Intel's southern operations. However, the Ministry of Finance's budget department chose to cancel the 1.3 billion shekel grant scheduled for 2025, while retaining a 1.06 billion shekel grant planned for 2026, contingent on Intel resuming investment in the plant.

Intel stated that its expansion plans in Israel are under review to align with customer demand. The Ministry of Finance confirmed it is acting according to the agreement with Intel. The Kiryat Gat plant is viewed as outdated and in need of upgrades, but no new expansion has been confirmed. Intel did receive a 1.5 billion shekel grant for its 2024 operations in Israel.

This development reflects ongoing challenges Intel faces globally and regionally, including geopolitical tensions in the Middle East and shifting investment priorities within the company.