Intel plant expansion frozen — 850 million shekels to be transferred to the defense budget

The Israeli government has approved the transfer of approximately one billion shekels to the defense budget for urgent needs. According to the report, the budgetary source for this transfer is 850 million shekels from the Ministry of Economy and Industry. Calcalist has learned that the entire amount was redirected from a grant intended for Intel, which was transferred to the defense budget due to non-utilization.

In December 2023, Intel and the State of Israel signed a massive agreement under which the corporation committed to investing about 25 billion dollars in the expansion of its plant in Kiryat Gat (construction of the Fab 38 plant). In exchange for the investment and meeting local procurement and employment targets, the state approved a grant of 12.5% of the total investment—a total of about 3.2 billion dollars (approximately 11.1 billion shekels), to be transferred in stages.

In June 2024, Intel Global announced the freezing of construction work on the new plant. The move stemmed from a global financial crisis that forced the company to carry out extensive cuts and a strategic shift, including the delay of similar projects in Germany and Poland. In 2024, the state transferred about 1.5 billion shekels to Intel for initial execution stages. However, since grant payments are conditional on meeting milestones, the state cancelled the grant planned for 2025, amounting to approximately 1.3 billion shekels, following the project freeze. The transfer of remaining planned grants is now conditional on the full resumption of work.

The Ministry of Economy stated that this budget was allocated for 2026 by the Ministry of Finance. The adjustment was made to align the state budget with the actual pace of business sector obligations.

Intel responded:

"As we have announced in the past, our expansion plans in Israel are currently under review to ensure they align with customer demand."