Intel said on Tuesday Israel was a “key” manufacturing site for the company, yet did not deny reports that it was halting construction on a new factory there in another possible setback for the Israeli tech sector amid the Gaza war.
The Israeli news outlet Calcalist reported on Monday that Intel’s suppliers have received notices of contract cancellations regarding the supply of equipment and materials for Intel’s planned factory in southern Israel.
Intel is a Silicon Valley-based technology company and one of the largest manufacturers of semiconductor chips in the world. In December, the Israeli government agreed to provide the firm with a $3.2 billion grant to build a new $25 billion chip plant in southern Israel’s Kiryat Gat.
An Intel spokesperson told Al-Monitor on Tuesday that Israel “continues to be one of our key global manufacturing and R&D sites and we remain fully committed to the region,” yet declined to say definitively whether plans for the new factory have been nixed.
“The scope and pace of Intel’s manufacturing expansion at our sites around the world depends heavily on various factors. Managing large-scale projects, especially in our industry, often involves adapting to changing timelines,” said the spokesperson. “Our decisions are based on business conditions, market dynamics and responsible capital management.”
Why it matters: The move could constitute a setback for Israel’s economy and technology sector. The economy has been negatively affected by the Gaza war, particularly the construction sector, with disruptions in Palestinian workers from the West Bank working in Israel.
Some companies have amended their Israel plans since the start of the war. Last week, British sandwich chain Pret A Manger said it has abandoned plans to open branches in Israel, citing war-related travel restrictions, according to multiple reports.
In April, Samsung Next, the innovation arm of the Korean technology giant Samsung, said it is shutting down its operations in Israel. In an email to staff, the company said its Israel operations would move overseas and that the company would continue to work with Israeli entities, Calcalist reported at the time.
Before the war, Israel’s tech sector was impacted by the government’s controversial judicial reform plans. Some companies moved capital out of Israel early last year in response to the proposed judicial overhaul. In 2022, Israeli startups’ fundraising declined in parallel with the global startup funding downturn, David Rosenberg wrote in a memo for Al-Monitor Pro in February of 2023.
Intel still has a significant presence in Israel, including a hardware and software development center in Haifa, a communications and artificial intelligence solutions development center in Petah Tikva and the Mobileye autonomous vehicle company’s development center in Jerusalem, according to the company’s website.
Intel acquired Mobileye in 2017 and in 2022, it bought the Israeli cloud computing company Granulate Cloud Solutions.
Know more: Intel canceled its acquisition of the Israeli chipmaker Tower Semiconductor in August of last year after the firms failed to obtain the necessary regulatory approval from China. The development was related to the US-China tech rivalry, Al-Monitor reported at the time.
