Intel Invests $6 Billion In Israel To Create Advanced Chip Manufacturing Facility

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Earlier this week, leading PC chipmaker Intel (NASDAQ:INTC) got approval from Israel’s Finance and Economy Ministries to invest $6 billion in the remodeling and continued growth of its chip manufacturing plant in Kiryat Gat. This will be the single largest investment made by a foreign company in Israel to date, and post the upgrade the Intel plant will be among the most advanced chip manufacturing facilities in the world. [1] The exact amount is subject to final approval by Intel’s Investments Center. In return, Intel will receive a grant of $300 million over five years from the Israeli government, and will be eligible to pay a low corporate tax rate of only 5% for a 10-year period. Intel Israel’s exports totaled $35 billion over a 40-year period. [1] The company plans to hire close to 1,000 more workers at the plant by 2023, in addition to 2,500 that already work there.

While Intel has yet to make an official announcement, the Israeli finance ministry believes the investment by the company will be used to manufacture its new advanced 10-nanometer (nm) chips.

Intel’s Leadership In Process Technology Gives It An Edge Over Competitors

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Within the semiconductor industry, Intel is known to have best-in-class R&D capabilities. It is the only chip maker with its own manufacturing, design and fabrication capabilities, which makes it less dependent on other companies. Its manufacturing lead gives it the world’s highest performing, lowest cost and lowest power transistors. [2]

Intel introduced its first 14nm Broadwell CPUs – Cortex M – at IFA Berlin, earlier this month. (Read: Intel Launches Its Most Energy-Efficient Processor To Spur PC Demand) Core M is the most energy-efficient Core processor in Intel’s history and extends the company’s lead over AMD, whose processors use the 28 nm processes from TSMC and Globalfoundries. [3] Broadwell will be succeeded next year by the 14nm Skylake architecture, which in turn will give way to Cannonlake (based on 10nm). [4]

Intel has the world’s most advanced process technology and is way ahead of competition in developing the 14nm and 10nm manufacturing technologies. It plans to offer the 10nm CPU by as early as 2016.

Our current price of $33 for Intel is slightly below the current market price.

See our complete analysis for Intel

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Notes:
  1. Israel, Intel Sign Historic $6 Billion Investment Deal, Breaking Israel News, September 23, 2014 [] []
  2. Intel’s CEO Discusses Q2 2013 Results – Earnings Call Transcript, Seeking Alpha, July 17, 2013 []
  3. Intel officially launches 14nm Core M CPUs, Seeking Alpha, September 5, 2014 []
  4. Intel cleared to invest $6B in Israeli Plant, Seeking Alpha, September 22, 2014 []