Intel, would start expanding the plant this year and work would be completed in 2020, the minister said in a statement.

A spokesman for Intel in Israel declined to comment.

The U.S. semiconductor firm has said it planned to upgrade the facility to 10-nanometer technology from 22-nanometer, making chips that are smaller and faster.

Intel received a state grant worth 5 percent of the $6 billion it invested in upgrading the plant in 2014, when it was also granted a reduced corporate tax rate of 5 percent for 10 years.

Intel is expected to receive a further grant of up to 10 percent of the $5 billion value for the latest expansion. A ministry spokeswoman said the precise amount would depend on Intel's final expansion proposals.

The director generals at the ministries of economy and finance, as well as the tax authority, are due to meet in the next month to agree in principle on Intel's outline proposal. The Economy Ministry, which approves grants, will review the detailed plan.

Intel Israel's exports rose to $3.6 billion in 2017 from $3.3 billion in 2016, boosted by the launch of a new generation of processors. Intel has invested $17 billion in Israel since 1974 and employs more than 10,000 people, 60 percent of them in research and development.

Intel bought Israeli autonomous vehicle technology firm Mobileye last year for $15.3 billion.

(Reporting by Steven Scheer; Editing by Tova Cohen and Edmund Blair)

By Steven Scheer