The Israeli Economy’s Got Intel Inside

The tech company is so important to Israel that it can sway GDP data

Intel Corp.’s investments in Israel were already shaping the country’s growth statistics, even before its record acquisition last week.

The world's largest chipmaker agreed to pay $15 billion for Jerusalem-based Mobileye NV, a maker of semiconductors and software for driverless cars – the most ever paid for an Israeli tech firm.

The deal comes after economists including Modi Shafrir at Mizrahi Tefahot Bank said Israel’s unexpected 6.5 percent fourth quarter expansion – the fastest pace in at least ten years – was in part driven by Intel’s $6 billion renovation of its plant at Kiryat Gat in southern Israel.

Intel, based in Santa Clara, California, employs 10,000 people in Israel – the most among the country’s largest exporters. Next-ranked Teva Pharmaceuticals Industries Ltd., the world’s largest maker of generic drugs, has close to 7,000 staff in the country.

While other global tech giants including Alphabet Inc., Apple Inc. and Facebook Inc. have research and development centers in Israel, their investments pale in comparison to Intel’s. The company exported products worth $3.35 billion from Israel last year, or nearly a tenth of the high-tech sector’s overseas sales.

Although it's difficult to quantify, Intel’s influence goes beyond exports and direct employment, according to Rafael Gozlan, chief economist at Israel Brokerage & Investments Ltd. in Tel Aviv. Former Intel workers are also using their experience to start their own tech businesses, he said, and the Mobileye deal could give the finance ministry extra room to cut taxes.

All of this should be good news for the government, who said in a report last year that the tech industry that had fueled Israel’s economy for the past two decades was stagnating. Though it grew faster than gross domestic product nearly every year between 1998 and 2009, in the five years following it surpassed national growth only once, in 2012.

“Intel's impact is significant in terms of growth,” Gozlan said. “Aside from its traditional chipmaking operations, you have to account for its contribution to the tech industry and to startups. It's true of other major companies of the world like Google and Facebook, who also have R&D centers in Israel. But the scope of Intel's investments is on a different level.”