Intel Delays Construction on Israel Plant in Effort to Manage Global Costs

Jillian Deutsch and Ian King, Bloomberg News

(Bloomberg) -- Intel Corp. will delay construction on its $25 billion chip-manufacturing plant in Israel as the company works to pace its multi-billion-dollar investments in factories planned worldwide, people familiar with the matter said.

The slowdown to Intel’s plans is temporary, the people said, asking not to be identified because the information isn’t public. The company sent a note to some suppliers last month informing them of the delay, one of the people said.

A representative for Intel said that the company remains “fully committed” to Israel and the region and that managing a large-scale project “often involves adapting to changing timelines.” “Our decisions are based on business conditions, market dynamics and responsible capital management,” the spokesperson said.

Chief Executive Officer Pat Gelsinger is seeking external funding for more of its projects — which can cost tens of billions of dollars and last for several years — and attempting to manage costs in a program the company’s called “Smart Capital.” Earlier this month, Intel agreed to sell a 49% stake in its Irish plant to a private equity company for $11 billion.

Intel announced plans for the plant, which is partly funded by $3.2 billion in incentives from the Israeli government, last year. The company is betting that expanded production capacity will help it attract more customers who want to produce their own designs in Intel’s factories, a strategy that’s been the key to success for Taiwan Semiconductor Manufacturing Co. and that Gelsinger hopes will return Intel to the summit of the chip industry.

Israeli newspaper Calcalist reported earlier on Monday that the project had been halted, citing suppliers who’d received notice that their contracts had been canceled.

The Israeli government had asked Intel to begin operations at the plant by 2028 and continue them until at least 2035. Intel also committed to spending 60 billion shekels ($16.2 billion) with Israeli suppliers over the next decade.

A spokesman for the Israeli Finance Ministry declined to comment.