Israel's government has approved a transfer of roughly NIS 1 billion ($333 million) to the defense budget, with most of it pulled from grants that had been earmarked for Intel's stalled semiconductor expansion in Kiryat Gat. The money had sat untouched since Intel froze the project in mid-2024.
Israel's government approved a transfer of roughly NIS 1 billion, about $333 million, to the defense budget on August 9. The bulk of it, some NIS 850 million ($283 million), came from grant allocations originally set aside for Intel's semiconductor expansion in Kiryat Gat.
The funds had been sitting unused. Intel froze further construction and investment milestones at the facility in June 2024 as part of a broader global spending review, and the project has not resumed since.
How Intel's biggest Israel deal stalled
The grants trace back to a 2023 agreement between Intel and Israel that was framed at the time as the largest corporate investment in the country's history. The deal committed Intel to a significant expansion of its manufacturing footprint in Israel, with the government pledging billions in incentives in return.
Intel received an initial NIS 1.5 billion, or $500 million, in 2024 to cover early project stages. A subsequent NIS 1.3 billion grant slated for 2025 was already canceled, and now the NIS 850 million has been rerouted to defense. Intel's global financial picture shifted in the meantime, as the chipmaker pulled back on capital spending across multiple geographies while reassessing its competitive position against rivals like TSMC and Samsung.
What's still on the table
A separate NIS 1.06 billion, or $353 million, grant for 2026 technically remains in the state budget, but it depends on Intel actually resuming its investment activity. The Kiryat Gat facility has a long history with state support: it previously received government grants of NIS 1.2 billion in 2014 and NIS 700 million in 2018.
Defense spending wins out
The reallocation reflects a blunt reality in Israeli fiscal policy. Israel has been operating under sustained security pressures that have stretched its defense budget considerably, and the alternative was leaving the funds untouched indefinitely while waiting for a multinational corporation to restart a frozen project.
Intel had already received NIS 1.5 billion before the freeze, and its existing operations in Israel continue. The remaining NIS 1.06 billion earmarked for 2026 stays theoretically available if Intel resumes work.
Source: Crypto Briefing
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