Intel has laid out its spending plans for Israel for the next five years, during which it will invest $550 million. For upgrading its Kiryat Gat plant, which will be involved in the manufacturing of new advanced chips for next-gen devices, the company has committed a total of $6 billion. The deal was announced on Sunday by Intel and the Economy Ministry’s Industrial Cooperation Authority, according to the Times of Israel.
Give and take deal
Intel has entered into an offset purchase arrangement with the state, and a $550 million is only a part of that. Intel will receive grants of up to $600 million from the state over the next five years and a major tax break through 2023. Over the five budget years, Intel will receive two grants of $300 million. For 2014, Israel had a standard company tax rate of 26.5%, but as part of the arrangement, Intel will be required to pay taxes at a discounted rate of 5% only through 2023.
In return, Intel will hire at least 1,000 new employees, and the residents of communities in southern Israel will get the opportunity to compete for 50% of the openings, says the report. Besides that, over the period the chip maker will spend at least $550 million as per its commitment.
Intel having a “multiplier effect”
More than 10,000 workers in Israel are already working for Intel, which claims it has a multiplier effect on hiring. The chip maker claims over 30,000 Israelis are working at the companies that provide products and services to Intel.
The Israeli economy will benefit substantially from the deal, according to Economy Ministry officials. However, there are people who say Intel is committed to spending only what it will receive as the grant from the state directly, says the report.
“This arrangement will have a very positive effect on hundreds of small businesses and suppliers,” said Ziva Eiger, director of investments at the Industrial Cooperation Authority.
Eiger further said such agreements offer multiple benefits in the way they leverage public expenditures to impart training and expand small suppliers for the local and world market. Also such agreements help in building the foreign investment brand of Israel, eventually leading to new job openings.