October 5, 2010 – The Israeli government is giving Intel hundreds of millions of dollars to infuse its 300mm/45nm semiconductor fab in Kiryat Gat — but it’s a lot less than Intel had been hoping for.

The Ministers of Finance and of Industry, Trade, and Labor reportedly have approved an eight-year, up to 678M shekel ($187M) grant to help upgrade Intel’s Fab 28, which opened in the southern city of Kiryat Gat two years ago, from 45nm to 22nm process technologies (plus another 63M shekels/$17M for R&D expansion or local research). The deal also stipulates that Intel must increase its Kiryat Gat workforce by about 22% (570 workers) to 3100 total, and add another 50 workers to its development center in Jerusalem. (The company currently employs about 6300 workers in Israel across two plants and four R&D centers.) The deal still needs signoff from Israel’s Knesset Finance Committee.

The ministries statement called the move "a significant step in the state supporting industry," and representing the government’s view of "great importance in the cooperation between Intel and Israel."

It’s something less of a step, though, than Intel had wanted — the company originally lobbied for a $400M grant to bolster its planned $2.7B upgrade of Kiryat Gat, with 400 new hires. (Note the Ministry’s Investment Center has a 500M shekel/$151M annual budget.) Nevertheless, Intel reportedly has pledged to "make every effort to see that Intel’s next investment in upgrading technology will be implemented in Israel." That statement begs a question: what are Intel’s near-term plans for other possible 22nm fab investments? One hopeful candidate is its facilities in Hillsboro, Oregon; Intel’s site in Leixlip, Ireland, has also been in the running for a 22nm upgrade. Some clarity is expected later this month with Intel’s quarterly results announcement.