The Israeli government announced on Monday that it has approved a plan submitted by Intel last April to upgrade its Kiryat Gat fabrication plant — likely putting to an end the long-running drama of where the company would manufacture its new 10mm chips.

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The deal is a good one for both Intel and Israel, the country's finance minister Yair Lapid said in the announcement. Intel gets grants of up to $600m and a substantial discount on corporate tax rates over the next decade. In return, Intel promises to hire an additional 1,000 workers, and spend hundreds of millions of dollars on products and services. Whatever Israel loses in the taxes and grants, said Lapid, it would make up in the enhanced economic activity Intel's upgrade will provide.

Intel, according to sources, has been of two minds on where to build the 10nm plant – in Israel or Ireland. The two countries have been lobbying for Intel's business, offering incentives and tax breaks – as would be expected, said Mooly Eden, Intel's international SVP and CEO of Intel Israel. At an event in Tel Aviv earlier this year, Eden said that both governments "know how the game is played. In today's world, this is how governments bring jobs in".

As an Israeli, Eden, of course, would prefer to see the plant in Israel, but for Intel the decision was purely economic. That said, the investment made sense for the government, Eden added. "Israel gets back a lot more from Intel that it does from other multinationals. Over the years Intel has invested $10.8bn in Israel. Taking into account all of the services and outside contractors we use, Intel's activities on Israel is responsible, in our estimation, for some 30,000 jobs in the Israeli economy."