Israel’s government agreed to give Intel Corp a US$3.2 billion grant for a new US$25 billion chip plant it plans to build in southern Israel, both sides said on Tuesday (Dec 26).

The news comes as Israel remains locked in a war with Palestinian militant group Hamas in the wake of the Oct 7 Hamas attack on Israel.

The expansion plan for its Kiryat Gat site is an “important part of Intel’s efforts to foster a more resilient global supply chain, alongside the company’s ongoing and planned manufacturing investments in Europe and the United States,” Intel said in a statement.

In addition to the grant that amounts to 12.8 per cent of the total investment, the chipmaker also committed to buy US$16.6 billion worth of goods and services from Israeli suppliers over the next decade, while the new facility is expected to create several thousand jobs.

Intel operates four development and production sites in Israel, including a manufacturing plant in Kiryat Gat, and employs nearly 12,000 people in the country.

In June, Prime Minister Benjamin Netanyahu said Intel would build a new US$25 billion chip plant in Israel, but Intel until now had declined to confirm the investment.

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Yet, Intel said construction work is already under way for the expansion of the site, including clean rooms and support buildings. A significant portion of the buildings, including the casting of piles and first floors, has been completed, it said.

The new plant is due to open in 2027 and operate through 2035. REUTERS