LONDON – The Israeli government is offering semiconductor giant Intel up to 1 billion shekels (about $290 million) to expand its manufacturing operations in the country, according to local reports.
Intel already has Fab 28 at Kiryat Gat in the south of the country and the latest announcement from the ministries of industry, trade and labor and of finance appears to be on top of a grant of $200 million towards the estimated cost of $2.7 billion of putting down a second fab module at the Kiryat Gat site. Intel was granted about $200 million in January 2011 but still wanted more (see Report: Israel offers Intel fab grant).
Israel has found some more money, but it is attaching employment strings and linking the funding to two locations, Kiryat Gat in the south and an chip assembly unit to be located in north of the country. The original Kiryat Gat expansion is expected to take the wafer fab's chip making capability down to 22-nm manufacturing process capability and the latest application for cash is expected to take it down to 14-nm.
As a condition of the grant, Intel will have to employ 1,500 additional workers in Kiryat Gat, and between 600 and 1,000 workers in the north, according to a Globes report. At the same time Intel will be given tax breaks under a new law intended to encourage capital investment, the report said.
The two ministries have come up with a three-stage system for Intel; 300 million shekels (about $90 million) for investment in Kiryat Gat alone; an additional 550 million shekels (about $160 million) for setting up an assembly plant in the north and employing 600 people; and a further 150 million shekels (about $45 million) for expanding the number of jobs in the north to 1,000. This is according to a Ha'aretz report.
The payments would begin in 2014 but the jobs have to last at least ten years, the reports said.
So let me get this straight.
We (US) send Israel $2Billion dollars yearly in aid. Then Israel gives it out in corporate welfare to US companies to entice them to move their operations and jobs to Israel. Then we wonder why we have high unemployment and debt issues.
Since much of that money is going to be spent in the local construction industry, it will end up being recycled back into the economy.
Don't forget that for every job created in the factory there is another few jobs created in support industries: people making cardboard boxes, courier drivers, making and selling lunches to workers, etc, etc.
Of course Israel gets so much aid from US, that it is really USA paying for this.
All up, not a bad deal for Israel.
Back in the 1980s 1990s it was, as I remember, quite normal for chip companies to demand about 30% of their costs to be be met by the location they were going to invest in.
This percentage has gone down as the cost of fabs has gone up and as fabs are less often built on a green field site but within an existing infrastructure, such as Kiryat Gat.
Nonetheless I understand, from Israeli news reports, that Intel usually asks for more than 20 percent and accepts somewhere between 12 and 20 percent.
The sticking point usually comes 10 years down the road if inward investment fails to maintain the promised employment and government has to try and clawback past monies.
Any non US next generation investment (latest IP) will be either Ireland or Israel, not China. The commissioning of FAB28 is still giving Intel corporate nightmares. Whereas Intel Ireland has always delivered excellent return on investment and will be able to offer a counter deal that doesn't rely on US taxpayers, in a stable, water rich environment. So if it's a business decision....
There is no reason to believe that if this new fab is not built in Israel it would be built in the US and not in China or elsewhere. On the $3billion aid: there are strings attached to that: Israel has to spend it to buy US arms, like fighter planes, etc. Hence, it is as much an aid to Israel as it is a job program for US military contractors.
Beats the heck out of paving a perfectly good road with foreign-oil-based asphalt for 6 weeks. 3100 DIRECT GUARANTEED jobs to Israel that could have been US jobs in AZ or OR at $116,000 per direct job, likely $30,000/direct job if you count all the other service jobs these create and support. The joke is that Israel gets $3B in aid from US taxpayers ( http://www.ynetnews.com/articles/0,7340,L-4101134,00.html ), only to have Israel write this check to have 10,000 US TECHNOLOGY taxpayers laid off as a result. America has gone full retard with the distractions and indifference and is going to pay a huge price for it.
Instead of outsourcing, many countries are now able to ask companies to go directly to them. This is economic benefit. However, I wonder what it's like to live in Israel as an ex-Pat so I did some research about the culture and business climate there. In addition, I remember a recent tech comm colleague mentioning that BMC had moved ops to Israel. I wonder what the benefits are for multinational companies for having a location there.