Israel is expensive to fab because of a labor crunch with American companies (eg. Intel, Micron) offering competitive salaries and land prices being Silicon Valley level insane.
This was why Tower Semiconductors (Israel's version of TSMC) negotiated sweetheart deals to open a fab in the US, China, and India before canceling them after an acquisition offer from Intel as well as COVID related supply chain issues in China's case.
A similar labor crunch has started to occur in the cybersecurity industry in Israel as well as MNC salaries have begun to reach Seattle levels
Israel is an expensive country. It's literally the same size and population of the Bay Area, and has similarly high land prices. This is also a big reason a lot of Israelis started buying houses and apartments in settlements in the West Bank - for the same price you could get a crummy 2 bedroom apartment in TLV or Jerusalem, you could get a house in Ariel or Efrat instead
Some of the largest Intel fabs are 52 miles away. But TSMC screwed up when selecting a site in Phoenix. They built on the other side of town. Any engineer currently working at Intel would need to sell their house and move to the other side of town, or be subjected at a 90min commute each way. If their plan was to lure those engineers, they’re going to need to pay more or provide a better quality of life. They appear to plan neither.
What is the rational behind this choice?
Israel would have been a better choice