Nearly three years after the festive announcement of one of the largest mega-investments in the country's history, reality appears to have completely shifted. The new plant planned adjacent to Intel's existing Kiryat Gat facility has yet to be built, production expansion has been frozen, and now one of the largest grants promised to the company has been taken off the table.
According to the State Budget Execution Report from the Finance Ministry's Accountant General Department, the ministry canceled a NIS 1.3 billion grant intended for the company for 2025. The move came after Intel froze its Kiryat Gat plant expansion plan and did not move forward with investments planned under its agreement with the state.
The canceled grant is part of an agreement signed in June 2023 between the state and the company. Under the deal, Intel committed to investing approximately $25 billion to expand its Kiryat Gat operations. In exchange, the state committed to providing grants worth 12.8% of the investment and raising the corporate tax rate Intel pays from 5% to 7.5%. At the time, government officials presented the agreement as a major vote of confidence in the Israeli economy.
However, less than a year later, the company notified contractors that work was being frozen until further notice. The project has not resumed since. Concurrently, additional projects planned by the company in Germany and Poland were frozen or canceled as part of its effort to navigate the crisis facing the chipmaker. In contrast, Intel's plant in Ireland received a new investment of roughly €5 billion.
According to budget execution figures, the grant allocated for 2025 was canceled in full. Nevertheless, an additional grant of NIS 1.06 billion still appears in the 2026 state budget. At this stage, it has not been canceled, likely in anticipation that investment in Israel will resume. If the freeze continues, however, that grant may also go unpaid.
Sources in the Economy Ministry, on the other hand, maintain that nothing has changed, telling Walla on Sunday morning that "broadly speaking, there is nothing new, nothing was canceled, and nothing was stopped."
Despite halting the expansion, Intel received a NIS 1.5 billion grant in 2024, representing one of the largest allocations given under the Law for the Encouragement of Capital Investments. According to an analysis by the Adva Center, this accounted for nearly 80% of the entire budget earmarked that year for encouraging investment and employment.
The company is also the primary beneficiary of grants under the Law for the Encouragement of Capital Investments. Over the past decade, grants received by Intel totaled approximately NIS 3.6 billion, alongside significant tax benefits. In return, it committed to making investments in Israel, expanding its operations, and purchasing goods and services from the local market.
At this point, it remains unclear what the implications of the grant cancellation will be on the continuation of the agreement between the state and the company, whether there will be an impact on funds already transferred to it, or what will become of the grant budgeted for 2026. The future of the factory expansion in Kiryat Gat also remains unknown.
Meanwhile, Intel's business situation is beginning to show signs of improvement. Over the weekend, the company reported a 60% jump in second-quarter revenue for 2026, totaling $16.1 billion, driven by surging demand for chips used in artificial intelligence applications and data centers. Despite this, the company has conducted extensive rounds of layoffs in recent years, including in Israel, where its workforce has dropped from roughly 12,000 to about 9,000 employees.
Intel: "Expansion plan in Israel is under review"
The Finance Ministry stated: "The Finance Ministry is acting in accordance with the agreement between the State of Israel and Intel."
Intel stated: "As we have previously announced, our expansion plan in Israel is currently under review to ensure it aligns with customer needs."