US chip giant Intel has launched a major downsizing campaign in Israel, slashing jobs and scaling back operations at its flagship manufacturing site in the southern city of Kiryat Gat, in a move signaling deeper structural challenges facing the company both locally and globally.

According to a detailed report by Israel’s Globes business daily, Intel has reduced its workforce at the Kiryat Gat plant from around 5,000 employees in 2019 to 4,000 by the end of 2023.

The company is undergoing a global restructuring after a sharp decline in annual revenue — from $78 billion in 2020 to $53 billion in 2023 — and a net loss of $18.7 billion during the same period.

Intel’s restructuring includes automating production lines at its Fab 28 plant, leading to the dismissal of some 200 manufacturing workers and around 10% of its research and development staff. Fab 28, which opened in 1996, had been a model of industrial performance, with cumulative exports worth $86 billion – contributing 3–3.5% of Israel’s total annual exports.

The report highlighted rising pressure on Intel from Taiwan’s TSMC, which now dominates advanced chip production for clients like Apple, Nvidia, and Amazon.

Uncertain returns

Globes noted that Intel has received an estimated $1.5 billion in government grants over the years. More recently, the Israeli government approved an additional $3.2 billion grant package for the construction of a new facility – Fab 38 – which has since been frozen amid the company’s retrenchment.

Despite halted construction and widespread layoffs, Israel’s Finance Ministry and Investment Authority have taken no punitive measures against Intel, as funding remains tied to pre-agreed benchmarks.

Intel’s contraction coincides with the rise of US rival Nvidia, which recently announced a $540 million plan to build a major development center in northern Israel, aiming to hire 5,000 employees.

Observers say this marks a broader shift in Israel’s tech landscape – from traditional manufacturing to AI-driven R&D.

The future of Intel’s presence in Israel remains unclear.

In Kiryat Gat, where many Israelis depend on Intel either directly or through contractors, the mood is increasingly tense. With construction on Fab 38 suspended and investments scaled back, locals fear long-term damage to the city’s economy.

Although Intel continues to offer generous benefits — including extended paid leave and severance packages that can exceed $238,000 — many employees, particularly older staff, are anxious about finding new employment in a shrinking job market.