Bibi Netanyahu must have been beaming when he announced to his Cabinet via television that Israel is to receive its biggest foreign investment yet: a $25-billion commitment from Intel to build a new chip-making factory and other facilities in Israel.  It is a great sign of confidence that Israel will continue to exist in the face of existential threats from Iran and Hamas/Hezb'allah, and it keeps Israel at the forefront of an important area of technology, where it is a global power despite its tiny size.

In understanding the scale of the investment, keep in mind this news from early last year:

Intel today announced plans for an initial investment of more than $20 billion in the construction of two new leading-edge chip factories in Ohio. The investment will help boost production to meet the surging demand for advanced semiconductors, powering a new generation of innovative products

So Intel probably is getting two factories, or fabs, as they are called — plus roughly 5 billion dollars more, some for inflation and some for other uses, most likely R&D.  This is far from Intel's first investment in Israel.

During its almost five decades of operations in Israel, Intel has grown to become the country's largest privately held employer and exporter and a leader of the local electronics and information industry, according to the company's website.

Specifically,

Since entering Israel in 1974, Intel has invested more than $17 billion in Israel and employs 11,700 employees at its three R&D centers — in Haifa, Petah Tikva and Jerusalem — as well as at its manufacturing plant in Kiryat Gat. Intel says it is currently responsible for creating indirect employments positions for approximately 42,000 workers in Israel.

Willy Shih, who teaches at Harvard Business School, explains the scale requirements to compete in this industry.

When you size a fab, there's a minimum efficient scale which determines your manufacturing capacity. In modern fabs, chips are made on 12 inch silicon wafers, and capacity is typically measured in 12 inch wafer starts per month — how many wafers do you put into the front of the line each month. This is determined by the capacity of your bottleneck step, as well as how much time the overall processes take. Wafers may take as much as two months to complete, depending on the number of steps in a recipe (as many as 700 or more). For advanced technologies, which are referred to by the "nodes" that describe their minimum feature size (e.g., 5 nm node), $10 billion might buy you 20,000 wafer starts per month. 

As for the machinery going into the fabs:

Earlier last week, Intel confirmed that it had ordered the first Twinscan EXE:5200 scanner from ASML in the Netherlands. This is the latest generation of extreme ultraviolet (EUV) lithography tools that play a crucial role in creating the atomic scale patterns on chips. While earlier versions of these machines cost over $150 million each, this particular model costs in excess of $340 million for a single unit. That's more than the list price of an Airbus A350-900, and airlines usually get big discounts (like as much as 50%). When that litho tool reaches production readiness it should crank out 200 wafers per hour.The scary thing is that fabs usually have to buy more than one of these machines. Since it is the most expensive tool, fabs buy enough of the other process tools so that litho is always the bottleneck. But the other tools aren't cheap either. So building a $10 billion fab might mean a billion for the building infrastructure and the rest for all the different tools.

Ninety percent of the fab investment in Israel will go to globally sourced equipment manufacturers, most of them not in Israel.  But this doesn't proportionally diminish the importance of the investment to Israel.  The D part of R&D, improving efficiency via the experience curve, is very important.  As Professor Shih puts it:

Volume is critical for semiconductor manufacturing — it is through production learning that you develop the capabilities to produce at scale.

Yield — the percentage of wafers that are usable — is the key to efficiency and profitability.  Notice that machinery is rated in "wafer starts."  It takes skilled and intelligent people to drive the experience curve faster than your competition.  That's where Israel's technical talent pool becomes important.  There are a lot of smart, well educated, and ambitious technical people available in Israel, and Intel is tapping this pool more deeply. 

Here is the Haifa R&D building, not massive, but it is one of three campuses, possibly to be joined by others out of that $5 billion extra.

Twitter screen grab.

It's pretty clear that Intel is more than satisfied with the performance of its investment in Israel.  This is a brutally competitive and strategically vital industry.  We saw what chip shortages do to other manufacturers when automakers were unable to get the chips they needed.  Expanding chipmaking in Israel makes Israel more important to the smooth functioning of the world economy.