Intel to build US$3.5bln chip plant in Israel

TEL AVIV (Reuters) - Intel will build a US$3.5 billion chip plant in Israel, the US company said on Thursday, the largest investment ever by an industrial firm in the country.

The news of Intel's second plant in Israel — which will produce 300mm wafers using 45 nanometre process technology starting in the second half of 2008 — confirms an announcement made in July by Prime Minister Ariel Sharon.

Sharon had said the company would invest around US$4 billion. Until now, Intel had declined to comment.

"Intel is committed to widening its lead in advanced semiconductor manufacturing," said Intel president and chief executive Paul Otellini in a statement.

The government has already approved a grant of US$525 million to cover the new facility and Intel's US$600 million plan to upgrade its existing plant.

Construction on the project, Intel's second 45 nanometre factory in the world, will begin immediately, Intel said.

The 45 nanometre technology will allow chip circuitry to be built at about half the size of today's standard 90 nanometre technology.

Intel said the project will create more than 2000 new jobs at the new plant in the southern town of Kiryat Gat, the site of the existing facility that employs about 3500 people.

The world's top chipmaker, whose processors power an estimated 80 percent of personal computers, reported exports from Israel of US$1.17 billion in 2004. Its exports peaked at US$2.02 billion in 2002.

The company, which has two plants and five development centres in Israel, accounted for 9 percent of Israel's total electronics and information technology exports in 2004. Centrino mobile technology was developed in Israel.

In 1999, Intel — active in Israel for 30 years — built its first plant in Kiryat Gat, with a total investment of US$1.6 billion, including government subsidies.

Manufacturing with 300mm wafers (about 12 inches in diameter) significantly increases the ability to produce semiconductors at a lower cost compared with more commonly used 200mm wafers. They also use 40 percent less energy and water per chip, Intel said.