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Intel rumored to plunk $10bn down for Israeli fab expansion

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The Israeli government, obviously excited to see more investment from chip giant Intel, has let the cat out of the bag that Chipzilla's plans to plunk $10bn into chip manufacturing plants in the Middle Eastern country.

The rumor that Intel was looking to invest big bucks in its Israeli operations, reported first in the paper edition of the Yedioth Ahronoth newspaper, was picked up by Reuters. According to the reports, Nahum Itzkovich, the new director of the Economy Ministry's Investment Centre, told Yedioth Ahronoth that Intel was talking to the ministry about "a huge investment of $10bn" and that it was "engaged in intensive negotiations with Intel" regarding expansion of chip manufacturing in the region.

Earlier this year, Yedioth Ahronoth reported that Intel had doubled its exports out of its Israeli fabs to $4.6bn in 2012, and that Intel Israel general manager Maxine Fassberg wanted to see Chipzilla bring its 10 nanometer technology to the Middle East rather than to its fabs in Ireland and the United States.

Over the past ten years, Intel has pumped $10.5bn into its chip making operations in Israel, and about $1.1bn of that went into facilities last year. According to Yedioth Ahronoth, Intel has received $1.3bn in government grants, which are presumably justified by the fact that Intel has over 8,500 workers in the tiny Middle Eastern country.

Intel is the largest employer not headquartered in Israel, and accounts for about 10 per cent of the country's industrial exports. You can bet the powers that be in Tel Aviv want to keep it that way, as much as other countries where Intel makes chips are no doubt putting the political pressure on to try to steal some of that production capacity away.

Intel operates two wafer bakers in Israel – on in Kiryat Gat and the other in Jerusalem – and a report on Bloomberg says that the deal Intel is trying to cut will have it upgrading the existing fab in Kiryat Gat with $3bn and the remaining $7bn being used to build a whole new plant.

Chipzilla declined to comment on the rumors, of course.

Intel is investing continuously in its research and development centers, its research fabs, and its production factories. But every now and then in plunks down a bigger wad. In February 2009, Intel laid out $7bn to upgrade plants in Arizona, Oregon, and New Mexico to 32 nanometer processes.

Back in October 2010, it invested $8bn to get its wafer bakers in the Arizona and Oregon were upgraded to the 22 nanometer technology that is used to make most of Intel's current chips for PCs, servers, and mobile devices. Last year, Intel invested $3bn in chip equipment manufacturer ASML to make sure it had equipment to etch chips at finer scale and on larger silicon platters, and it spent another $11bn on capital expenses, mostly for its chip plants. ®

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