Intel is currently in discussion with the Israeli the Ministry of Industry, Trade and Labor over a new plant in Israel.
The technology giant wants to open a new facility next to its current one in the southern Israeli city of Kiryat Gat, and is asking for financial initiatives from the Israeli government amounting to $400 million of its $2.7 billion price tag. The Ministry of Industry, Trade and Labor is reportedly offering only between $200-250 million. The plant will provide 400 new jobs. But according to local media, something of a two-for-one-deal might be in the offing: an incentive package more to Intel’s liking might be forthcoming if the company also follows-through on a proposal to build another new facility in northern Israel.
Prof. Moshe Justman, Dean of the Faculty of Humanities and Social Sciences at Ben-Gurion University, and an expert on the economics of innovation, told The Media Line that negotiations of this type are not unusual.
“It’s quite common,” Justman said. “Intel is expecting to have negations when establishing new plants”
According to Justman, “Intel has a bargaining position in deciding where its plants will be, and Intel expects certain concessions or support from the government. But there are other considerations as well, such as the quality of the work force and transportation. What the government is considering are the effects of having a new plant in Kiryat Gat and what impact it will have on the regional development and the national development.”
Asked who has the upper hand in the current negotiations, Justman said that it’s hard to say. He suggests that because“Israel does depend on Intel and Intel depends on Israel; there are advantages for both parties.”
“The stronger the Israeli economy and hi-tech industries become, then the position for the government is stronger; but on the other hand there is only one Intel,” Justman said.
“There is a long stand relationship between the two with mutual befits and Intel going to continue to have a presence in Israel for a long time,” he said.
When Intel set up a Research & Development facility in the northern Israeli city of Haifa in 1974, it was the first time the company established an overseas operation. The Haifa investment paid-off for Intel when the Centrino micro processor was developed there and became a huge hit when it reached the market in 2003. It came at a time when Intel was struggling and falling behind its competitor, AMD.
In addition to facilities in Haifa and Kiryat Gat, Intel also has operations in Jerusalem, Yakum and Petach Tikva. More than 6300 people are working directly for Intel in Israel, with thousands of more employed in external positions.
Oded Hermoni, CEO of Hi-Tech Industry Association in Israel, told The Media Line that the skill of the workforce is an important factor for multinational companies when considering establishing operations in Israel.
“Israeli start ups have the ability to do more with less,” Hermoni told The Media Line. “Israeli engineers are known for the ability to innovative. The ability for big multinational companies such as IBM, Google, Cisco, Microsoft and Intel to establish R&D centers [in Israel] was mostly accomplished by acquiring local start-ups, seizing those opportunities.”
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