Intel to delay plans to build wafer fab in Israel

US tech giant Intel met with engineering contractors and told them about its decision to postpone plans to build a new semiconductor factory in Israel, Calcalist reported on Monday, citing contractors who attended the meeting. One of the contractors said they were told the delay would be six months to a year, but no date for the start of work had been set.

In May, Intel confirmed plans to invest approximately $5 billion to expand its Kiryat Gat production plant in Israel, which will be in production by 2020 and will continue to develop some of the most advanced computer chips, according to reports at the time. As part of the investment plan, Intel is expected to receive a 5% tax rebate until the end of 2027, as well as a government grant of 700 million shekels ($194 million).

Asked about the investment in the plant, Intel Chief Executive Bob Swan, who is visiting Israel, said on Sunday the company had decided to increase capacity at its three plants in Israel, the United States and Ireland to meet growing demand.

“That was our intention, and we submitted a business plan in December or January,” he said, which also includes Israel. “Our goal is to expand our capacity and facilities in those three locations over time so that we don’t constrain growth for our customers. That hasn’t changed.”

Asked about the Calcalist report, Intel said in a text message, “Intel is committed to Israel and continues to invest in it. Israel is one of Intel’s global manufacturing and development centers, including our production facility in Kiryat Gat and Mobileye’s management headquarters in Jerusalem.

But the Calcalist filing states that Intel has not provided updates on the new projects since it submitted a business plan to Israeli regulators in January. The statement further states that "each investment is made in phases and is subject to change based on business, economic and other needs."

Calcalist said Intel has decided to go with its Irish factory first and go slower with the Israeli factory.

On Sunday, Swan launched an open innovation startup accelerator program in Tel Aviv that will help develop early-stage companies in key Israeli industries, including artificial intelligence, autonomous systems and other data-centric technologies. The company added that it will not take equity stakes in the startups for now, but may eventually do so.

Intel is one of Israel’s largest employers and exporters, and many of the company’s new technologies are developed in Israel. This year, Intel said it would invest about $11 billion to expand its manufacturing operations there.

“Israel’s deep skill base in artificial intelligence, autonomous driving systems and the underlying technologies that are critical to these changes made us a natural choice to launch the Ignite program,” said Intel CEO Bob Swan.

Two years ago, Intel spent $15.3 billion to acquire Israeli self-driving car technology company Mobileye. This acquisition has significantly enhanced Intel's position in the field of self-driving cars, and the acquired company's visual recognition chip business is also more in line with Intel's main business.

"I have absolutely no regrets about the Mobileye acquisition," Swan told reporters in Tel Aviv, Israel, adding that since the acquisition, Mobileye has doubled its penetration in the high-growth industry of self-driving cars.

Because Mobileye is a "foreign monk who knows how to chant sutras", in April this year, Intel reorganized all of its autonomous driving research and development businesses and laid off dozens of engineers from its autonomous driving research and development department in Silicon Valley, USA. The future autonomous driving car business will be centered on Mobileye.

Mobileye reportedly had more than 600 employees in Israel at the time of the acquisition, and that number has now doubled.