Intel Corp. has received a $3.2 billion grant from the government of Israel to build a new $25 billion chip fab in the country.

The company announced the deal today. Under the terms of the agreement, Intel’s tax rate in Israel will increase from 5% today to 7.5%. According to Reuters, the chipmaker received an offer for a smaller grant and a lower tax rate but chose a larger grant and a higher tax rate instead.

Intel employs about 12,000 people in Israel across four campuses. One of those campuses is a chip plant called Fab 28 in the southern city of Kiryat Gat. According to Intel, the new $25 billion fab that it’s building will be located in close proximity to that existing facility. 

The company detailed today that construction work has already begun. The upcoming chip plant, which is known as Fab 38, is expected to create thousands of jobs when it comes online in 2028. It’s set to operate through 2035.

In late 2022, Intel disclosed that Fab 38 is set to be ten times larger than its existing Kiryat Gat plant. The facility will reportedly be supported not by pillars but rather a metal frame designed to leave more space for manufacturing equipment. That equipment, in turn, is reportedly set to include EUV machines from ASML Holding NV.

EUV machines, which cost up to $200 million apiece, carve transistors into silicon wafers using beams of laser light. Earlier this year, Intel began mass producing chips using such systems at its fab in Leixlip, Ireland. The fab produces seven-nanometer central processing units for servers and personal computers.

Intel’s existing Kiryat Gat fab makes chips based on a less advanced ten-nanometer node. Because the new $25 billion plant the company is building will feature EUV equipment, it may be capable of making chips based on newer processes. The seven-nanometer node Intel uses at its Leixlip fab is one of several EUV-powered processes it plans to roll out in the coming years to enhance its manufacturing capabilities. 

Previously, Intel teamed up with investment firm Brookfield Asset Management to expand its chip manufacturing campus in Arizona. The $30 billion project will see the company build two new fabs at the site. The facilities will produce chips using Intel’s upcoming Intel 20A, or five-nanometer, process.

The company earlier announced plans to build two more fabs in Ohio at an estimated cost of over $20 billion. According to Intel, the facilities will be part of a chip manufacturing “megasite” in which it could invest up to $100 billion over time. The company will also spend more than €30 billion to build a pair of fabs in Magdeburg, Germany. 

Image: Intel