Economic Headwinds, Ongoing Conflict: Foreign Investment Climate For Israel Very Challenging – OpEd


Intel called Israel a ‘key’ manufacturing location on Tuesday (June 11), but did not confirm or deny reports that it had stopped building a new factory there. This comes as another potential challenge for Israel’s tech industry amid the ongoing Gaza war, according to Al-Monitor. On Monday (June 10), Israeli news site Calcalist had reported that Intel’s suppliers were notified about the cancellation of contracts for providing equipment and materials for Intel’s planned factory in southern Israel.

Intel, a major tech company from Silicon Valley (region in North California) and one of the world’s top semiconductor chip-makers, received a $3.2-billion grant from the Israeli government in December. This funding was meant for building a new $25-billion chip factory in Kiryat Gat, located in southern Israel.

On Tuesday (June 11), an Intel spokesperson told Al-Monitor that Israel was still one of its key global manufacturing and R&D locations, and it was fully committed to the region. However, the spokesperson did not confirm if plans for the new factory had been cancelled.

Speed and Scale of Intel’s Growth

The speed and scale of Intel’s manufacturing growth at its global sites depend on many factors. Handling big projects in the industry often means adjusting to new timelines and decisions are made based on business conditions, market trends and careful money management.

But this decision could be a blow to Israel’s economy and tech industry. The war in Gaza has already hurt the economy, especially the construction sector, due to disruptions in the work of Palestinian labourers from the West Bank in Israel. Since the war began, some companies have changed their plans for Israel. Last week, British sandwich chain Pret A Manger announced that it had dropped plans to open branches in Israel due to travel restrictions imposed by the war situation, according to reports from various sources.

In April, Samsung Next, the innovation division of Samsung, announced that it was closing its operations in Israel. According to Calcalist, the company informed its staff via e-mail that these operations would be moved overseas, but that Samsung would continue collaborating with Israeli organizations.

Before the war, Israel’s tech sector was already facing challenges due to the government’s controversial judicial reforms plans. Some companies moved their funds out of Israel early last year because of the proposed changes. In 2022, fundraising for Israeli startups also dropped, mirroring the global decline in startup funding, as David Rosenberg noted in a memo for Al-Monitor Pro in February 2023.

Intel continues to have a strong presence in Israel. According to the company’s website, it has a hardware and software development centre in Haifa, a development centre for communications and AI solutions in Petah Tikva and the Mobileye autonomous vehicle development centre in Jerusalem. Intel bought Mobileye in 2017 and acquired Israeli cloud computing company Granulate Cloud Solutions in 2022.

In August last year, Intel cancelled its acquisition of Israeli chipmaker Tower Semiconductor because it could not get the necessary regulatory approval from China. This issue was linked to tech rivalry between the US and China, according to Al-Monitor.

A report in Tom’s Hardware, however, added that Israel’s Ministry of Finance also indicated that it had spoken to senior Intel officials who indicated that there had been a change of contractor at Kiryat Gat—a likely cause of the cancellation of the existing contracts—but that there would be no substantive delay in implementing the $25-billion project.

Girish Linganna

Girish Linganna is a Defence, Aerospace & Political Analyst based in Bengaluru. He is also Director of ADD Engineering Components, India, Pvt. Ltd, a subsidiary of ADD Engineering GmbH, Germany. You can reach him at: [email protected]

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