Intel plans chip factory in Israel

Intel will build a new chip factory in Israel at a cost of $4 billion, the biggest ever foreign investment in the country.

Israel government, afraid that the world biggest chipmaker may shift to a rival location such as India, agreed to pitch in a whopping $525 million in the project after initial reluctance, daily Ha'aretz reported on Monday.

The finance ministry had approved a $440 million state grant to Intel four and a half years ago when the plan was mooted and Finance Minister Benjamin Netanyahu was not willing to cough up more at the request of the IT giant but complied with pressures from Trade and Industry Minister Ehud Olmert, supported by Prime Minister Ariel Sharon.

"It is also reasonable to assume that not one of these politicians wanted to have his name associated with driving Intel into the arms of a rival location, such as India," the daily said.

"I see this decision as a declaration of confidence in Israel's economic policies, in its stability and strength," Sharon told the cabinet informing about the single largest investment ever in Israel.

The factory will employ 2,000 people directly and an additional 2,000 indirectly, the prime minister said.

The company already employs several thousand Israelis at its existing plant in Kiryat Gat, a city south of Tel Aviv.