Intel will become Israels top foreign investor

Intel, the Santa Clara company whose "Inside Intel" logo adorns most of the world's personal computers, is going inside Israel in a big way — making the largest investment ever made there by a foreign firm.

The Silicon Valley chip manufacturer received Israeli government approval last week to build a $1.6 billion semiconductor plant in Kiryat Gat that is expected to generate $1 billion in annual revenues.

The new plant will "increase the perception in the world of Israel as a leading high-tech country," says Nimrod Barkan, Israel's S.F.-based consul general for the Pacific Northwest.

The Negev Desert plant also will provide a shot in the arm to the economy of Israel's south, with most of the workers expected to be drawn from the area between Ashdod and Beersheva. It will employ 1,500 people directly, and provide work for more than 3,000 others through contractors and suppliers.

"This is not just a manufacturing plant. It calls for the employment of highly qualified people," says Barkan.

Intel, whose Pentium chips are hooked into 75 percent of the world's personal computers, first established a foothold in Israel in 1974, alongside major computer-hardware makers such as Apple and IBM.

Currently Intel Israel, one of the largest high-tech firms with 1,500 employees, maintains a development center in Haifa, a microchip-processing factory in Jerusalem, a networking software development center in Netanya, and a regional sales office in Tel Aviv.

The new plant will produce Flash Memory, which provides easily reprogrammable memory for computers and other systems, and retains data even when the computer's power is turned off. Construction is expected to take 20 months, and production is scheduled to start in three years.

Dov Frohman, general manager of Intel Israel, says the Jewish state's skilled workforce was 90 percent of the reason Intel decided to establish the plant there. Israel beat out competition from many countries and virtually every state in America.

Intel's Silicon Valley spokesman, John Thompson, says the company's long history in Israel was also a key factor in choosing to build the new plant there.

"When we look to locate a facility, we have two choices: Start a new site, or pick a site where we already have some infrastructure. We prefer to build where we have already been successful."

Intel has certainly produced in Israel. Its Israel's exports last year totaled $364 million, making it one of the country's top 10 exporters.

Frohman, who is also a vice president of Intel Corp., says the output per employee will be $450,000 per year when the plant is at full production — 10 times the average in Israeli industry today.

The planned facility will be the first memory chip plant constructed by Intel in 15 years. The only other such plant is in Albuquerque, N.M.

When the Israel plant is completed, Thompson says, Intel finally will "have another source of production for these chips, so we can serve a large, growing customer base."

Kiryat Gat, a development town halfway between Tel Aviv and Beersheba, is expected to be transformed by the plant, which will consume more electricity than the entire town does now, and will dominate it economically.

A 150-acre site has been allocated to the facility. In the first phase, over 1 million square feet of floor space will be built.

As an incentive, Israel awarded Intel a controversial tax-subsidy package worth a third of its overall investment — 38 percent — to be paid over 10 years, according to Reuters.

Israeli officials hope the new plant will not only help the Negev blossom economically but will pour more international investment into the country.

Barkan, citing recent investments in Israel from companies such as Southwestern Bell and Office Depot, predicts that Intel's growing presence inside Israel will do just that.

"If a company the size of Intel is making such a long term commitment to Israel, it's proof that Israel is a country where investment is worthwhile," he says.