When the chips are down

Negotiations are under way to keep Intel Israel's Jerusalem facility in operation.

By SHELLY PAZ
intel 298.88 (photo credit: Courtesy of Intel)
intel 298.88
(photo credit: Courtesy of Intel)
Despite the recent announcement that Intel Israel plans to close its Jerusalem chip plant, the Jerusalem Development Authority has entered into quiet negotiations with Intel International in an effort to change the company's decision. However, Intel Israel's general manager, Alex Kornhauser, rejects claims that Intel is abandoning the city and says that its research center will stay in Jerusalem and that no jobs will be lost. Two weeks ago, in a press conference, it was announced that the Intel Jerusalem plant known as Fab8, which produces 6-inch chips used in the automobile industry, would be closed by the end of this year, and that the new factory in Kiryat Gat would be opened at around the same time. The announcement caught the local authorities unprepared. Mayor Uri Lupolianski asked Eli Yishai, the Minister of Industry, Trade and Labor, to assist in preventing the move, claiming that it would have a detrimental effect on the city's economy and status. "A few weeks ago we were notified that the Israeli government decided to grant Intel Israel $2.4 billion to establish a new plant in Kiryat Gat. Without a doubt, this decision has tremendous significance for the Israeli hi-tech industry," wrote Lupolianski. "Unfortunately as it appears, there was no intention to really open a new plant that will increase employment, it is just a financial trick. While Intel declared that it would open a new plant in Kiryat Gat, it is also threatening to close their Jerusalem one. This means the loss of hundreds of jobs for the capital's residents and damage to the city's economy. This, at a time when the government has declared that the economic development of Israel's capital should receive special attention and has decided to award special grants for hi-tech employees who move to the city." Lupolianski asked the government to help stop the process or to take the estimated damage to Jerusalem's economy out of the grant and transfer it to the municipality. "I intend to speak with Intel's CEO to ensure that the plan presented by the company does not place an added burden on Israel's employment situation," said Yishai in response. "The company's decision to cut jobs in Jerusalem the moment its undertaking was no longer binding appears to be in poor taste, even if Intel has met all the requirements set by the government." He also expressed his deep confidence that Intel's management had no intention of increasing unemployment or harming the technological development of the capital. Ezri Levy, the CEO of the Jerusalem Development Authority, thinks that no harsh measures are required in this case. "There are negotiations with the international management of Intel to change its decision. Fab8, Intel's Jerusalem plant, is the oldest plant in the city and is very profitable too. But Fab8 produces a certain type of chip that the company has decided to stop producing, as part of their global strategic plan. They have received orders for the next year and a half, and then they are going to cut off this production line." Levi believes that Intel will stay in Jerusalem despite the latest announcement. "The company received grants for 15 years and it has been here for 23 years. The problem is that Jerusalem doesn't have massive land for industrial purposes, and when Intel tried to find a different location for its new plant in Jerusalem they were told that there was no suitable land. This is why the Safdie plan is so important to Jerusalem, because it includes an industrial park near Mevaseret Zion for future industries." "Throughout the years Intel closed several 6-inch plants, like the one in Jerusalem, all over the world, due to a general move to 8- and 12-inch factories," says Kornhauser, who, as well as being the CEO of Intel Israel is also a VP in the Intel Corporation. "The success of the factory in Jerusalem led to the opening of the one in Kiryat Gat, and we have already transferred 35 percent of our Jerusalem staff to the Kiryat Gat plant. "Transferring employees between plants is not irregular," continues Kornhauser, who claims that all of Intel's employees in Jerusalem would be given the opportunity to move to a different Intel location in Israel, and that the new plant means more jobs overall for the economy. "The Intel Jerusalem campus also has a development center with 400 employees, and they will continue to work here in the city." He added that the company is investigating alternative solutions to the space in Jerusalem that will be vacated by the end of 2007. "It is not like we are leaving the building and turning the lights off. We are going to keep this space, and one possible option is to use it as an adjunct facility to the Kiryat Gat factory." Kornhauser says he is personally offended by the accusations that the company tricked the government to get the grant and to move to Kiryat Gat. "I have been living in Jerusalem for all my life, and I can assure that Intel has no intention of harming the city's economy. Intel did look for another space in Jerusalem to build the new plant, but real estate like the one needed couldn't be found. Actually, the government recommended Kiryat Gat." Last week, the Knesset's Finance Committee released a statement that called for Intel to stay in Jerusalem and to keep operating their plant there. One of the committee members, who preferred to stay anonymous, said that a company like Intel should be treated with the carrot instead of the stick and its decisions should not be referred to as "plots" or "tricks." "It is very unhealthy to interfere with the private, economic considerations of foreign investors in Israel. This might influence other potential investors for the worse," he said.