Israel redirects $333 million to urgent defense needs, tapping frozen Intel grant
The government approved a roughly NIS 1 billion transfer, including $283 million in unused funds originally earmarked for Intel’s stalled Kiryat Gat expansion.
The Israeli government on Sunday approved a transfer of approximately NIS 1 billion ($333 million) to the defense budget to cover urgent needs, with about NIS 850 million ($283 million) coming from the Ministry of Economy and Industry.
Calcalist has learned that the entire NIS 850 million was originally earmarked for a government grant to Intel for the expansion of its semiconductor manufacturing site in Kiryat Gat. Because Intel has frozen the expansion and the related investment milestones have not been met, the funds were not expected to be disbursed and are now being redirected to defense spending.
Intel and the Israeli government reached an agreement in December 2023 under which Intel planned to invest $15 billion in a new manufacturing facility at its Kiryat Gat site. In return, the government committed a NIS 3.2 billion ($1.07 billion) incentive package, to be paid in stages and subject to the company meeting investment and other milestones
Intel received NIS 1.5 billion ($500 million) from the state in 2024 for the initial stages of the project. But in June 2024, the company announced that it was freezing construction of the planned expansion as part of a broader global review of its spending and manufacturing plans.
As a result, the government canceled the NIS 1.3 billion ($433 million) grant that had been allocated to Intel for 2025. The remaining funding was tied to the resumption of the project and further investment at the site.
The government's latest decision therefore does not represent a new cancellation of funding to Intel. Rather, it reflects the growing gap between the incentives allocated on paper and the pace at which Intel is actually investing in the Kiryat Gat expansion.
A further NIS 1.06 billion ($353 million) grant allocated for 2026 remains in the state budget and has not been canceled. Intel Israel has said that its expansion plans remain under review and that the company is assessing them against customer demand.
The Kiryat Gat plant has long been one of the largest recipients of government support under Israel's Law for the Encouragement of Capital Investments. Intel received a NIS 1.2 billion ($400 million) grant in 2014 and another NIS 700 million ($233 million) grant in 2018.
The Ministry of Economy and Industry said the funds were part of the 2026 budget and that the change reflects an adjustment of government spending to the pace at which obligations are being realized and to expected cash-flow needs.
