Chipmaker Intel Corp. has committed to building a new manufacturing plant in Kiryat Gat, Israel, as part of an ongoing effort to diversify its production operations away from Asia.

The deal was announced by Israeli Prime Minister Benjamin Netanyahu today, and Intel separately confirmed that it’s intending to expand its manufacturing capacity in the country, where it’s already active.

The new facility will be for wafer fabrication, similar to Intel’s existing facilities in the country, a person familiar with Intel’s plans told Bloomberg.

“This is the largest investment ever in the State of Israel,” Netanyahu’s office said in a tweet. “It is an expression of great confidence in the Israeli economy and reflects the strength of the free economy we have built, and the technological economy we’re developing here.”

Although Netanyahu claimed that deal is valued at $25 billion, Bloomberg’s source said this figure includes a previous, $10 billion investment announced by Intel in 2021.

A spokesperson for Intel confirmed that the chipmaker intends to “expand manufacturing capacity in Israel” as part of Chief Executive Pat Gelsinger’s “IDM 2.0” strategy, which involves building new manufacturing hubs across the world. The idea is to reduce Intel’s reliance on Asian chip manufacturing, which caused huge supply chain problems during the COVID pandemic.

The expanded Israeli operation is just the latest new manufacturing hub to be announced by Intel. Last week, the company announced it is building a $4.6 billion semiconductor assembly and testing facility in Wroclaw, Poland.

Intel is said to be taking advantage of some considerable subsidies to advance its expansion plans. As part of the agreement with Israel, it’s likely to be eligible for a grant that represents 12.8% of its total investment there, Bloomberg said.

The company is also taking advantage of the roughly $52 billion in incentives offered by the U.S. government as part of the Chips and Science Act passed last year. Europe has passed its own Chips Act initiative, and a result of that legislation is that Intel is hoping to get up to $11 billion in subsidies from the German government in return for building a new manufacturing complex in the eastern city of Magdeburg.

Under Gelsinger’s leadership, Intel has pursued bold expansion plans as part of an effort to regain its crown as king of the semiconductor industry. With the personal computer market in a slump, and rivals muscling in to Intel’s data center turf, the company is no longer the undisputed leader in computer chips. Nvidia Corp., whose chips almost exclusively power artificial intelligence computing, is the new superstar, with its market capitalization recently surpassing $1 trillion, compared with just $150 billion for Intel.

As part of Intel’s IDM 2.0 strategy, it also intends to boost its position in the contract chip manufacturing space, using its facilities to manufacture chips for other companies. To boost these plans, it announced plans to acquire Israel’s Tower Semiconductor Ltd. for $5.4 billion more than a year ago, though it has not yet closed on the deal.

Photo: Intel