The State of Israel has canceled a NIS 1.3 billion grant intended for Intel for 2025, according to the State Budget Execution Report from the Finance Ministry’s Accountant General Department. The cancellation follows the chipmaker’s decision to freeze its Kiryat Gat plant expansion plan and halt planned investments under a multi-billion-dollar agreement signed with the state.
June 2023 Agreement and the Kiryat Gat Expansion Freeze
The canceled funding stems from an agreement signed in June 2023 between the State of Israel and Intel. Under that deal, Intel committed to investing approximately $25 billion to expand its operations in Kiryat Gat, where a new plant was planned adjacent to the existing facility. In exchange, the state committed to providing grants worth 12.8% of the investment and raising the corporate tax rate paid by Intel from 5% to 7.5%. Government officials initially presented the pact as a major vote of confidence in the Israeli economy.
Less than a year later, however, the company notified contractors that work was being frozen until further notice, and the project has not resumed since. Concurrently, Intel froze or canceled additional projects in Germany and Poland while navigating a broader company crisis. In contrast, Intel directed a new investment of roughly €5 billion to its plant in Ireland.
Contrasting Official Stances and Prior State Allocations
Despite the halted expansion and the canceled 2025 funding, sources in the Economy Ministry maintained a different position, telling Walla on Sunday morning that “broadly speaking, there is nothing new, nothing was canceled, and nothing was stopped.” Meanwhile, the Finance Ministry stated that it is “acting in accordance with the agreement between the State of Israel and Intel.”
Even with the freeze, Intel received a NIS 1.5 billion grant in 2024 as one of the largest allocations distributed under the Law for the Encouragement of Capital Investments. An analysis by the Adva Center showed that this single allocation accounted for nearly 80% of the entire budget earmarked that year for encouraging investment and employment. Over the past decade, grants received by Intel totaled approximately NIS 3.6 billion, alongside significant tax benefits, in exchange for commitments to invest in Israel, expand operations, and purchase local goods and services.
Future Budget Implications and Market Context
Budget execution figures indicate that while the 2025 grant was canceled in full, an additional grant of NIS 1.06 billion still appears in the 2026 state budget. This allocation has not been canceled at this stage, likely in anticipation that investment in Israel will resume, though the grant may also go unpaid if the freeze continues.
Lip-Bu Tan recently held a Panther Lake processor silicon wafer as the company’s business situation showed signs of improvement. Over the weekend, Intel reported a 60% jump in second-quarter revenue for 2026, totaling $16.1 billion, driven by surging demand for chips used in artificial intelligence applications and data centers. Despite the revenue increase, the company has conducted extensive rounds of layoffs in recent years, reducing its workforce in Israel from roughly 12,000 to about 9,000 employees.
Intel stated that its “expansion plan in Israel is currently under review to ensure it aligns with customer needs.” At this point, it remains unclear what implications the grant cancellation will have on the continuation of the agreement between the state and the company, whether funds already transferred will be affected, or what will become of the grant budgeted for 2026.