What Intel gains, what Israel gets
Intel employs some 12,000 Israelis, including 4,000 in manufacturing and 8,000 in development, paying good wages. Over the years, it has invested $50 billion in Israel and purchased $25 billion from suppliers, most from small to medium-sized businesses. In 2022, Intel exports from Israel totaled $8.7 billion, 5.5% of all hi-tech exports.
In addition, Nave notes that former Intel Israel employees have founded successful start-ups, such as Tower Semiconductor and Mellanox. Intel’s VC company, Intel Capital, has invested heavily in Israeli start-ups.
Intel’s acquisition of Jerusalem-based Mobileye for $15 billion in 2017 was the largest exit of an Israeli start-up and generates substantial profits for Intel. In October 2022, Intel took Mobileye public, offering 5%–6% of outstanding shares while retaining majority control. The markets currently value Mobileye shares at $21.9 billion – more than what Intel paid to acquire it.
In 2022, Intel bought computing tech start-up Granulate for a reported $650 million. It was the seventh purchase of an Israeli start-up by Intel in just five years.
There are several dramatic episodes in which creative Israeli engineers have brought groundbreaking ideas to fruition and boosted Intel’s top and bottom lines.
For example:
- Dadi Perlmutter, who went on to become Intel Global VP, and colleagues persuaded then-Intel CEO Andy Grove to design and produce the Pentium microprocessor rather than pursue IBM’s RISC technology. They did this as relatively junior engineers; to his credit, Grove listened. In 1995, the Los Angeles Times reported that the Pentium, a smash hit, boosted Intel’s profits by 44%.
- An Intel Israel team developed the Centrino chipset that enabled laptops to “take your office with you” and communicate via WiFi.
- Multi-core architecture – two or more cores, or central processing units, on a microprocessor – was driven by Intel Israel. The laptop on which I am writing this column has a multi-core i7 Intel microprocessor.
Dark clouds
There are some dark clouds hovering over both Intel and Israel.
Sagi Cohen recounts in The Marker that in the past two years, not a single Israeli start-up was launched in chips. At the same time, Israeli designs are leading the world in artificial intelligence chips, through multinationals’ design centers in Israel, especially Nvidia.
In 2019, Nvidia, a US chip company, acquired Mellanox, an Israeli start-up founded in May 1999 by former Intel manager Eyal Waldman and former Intel and Galileo managers, for $6.9 billion. Turned out to be a bargain.
On the surface, it seemed an unusual fit. Mellanox’s forte was high-speed networking for data centers, quite different from Nvidia’s offerings. But Nvidia founder Jensen Huang envisioned a harmonious path to market-leading AI chips via Mellanox’s technology.
Mellanox knew how to speed up networks. The same knowhow could be used to vastly speed up AI chips. And it did.
Recently, Huang unveiled plans for one of the world’s most potent AI-driven supercomputers, built here in Israel. With its first phase completed in only 20 weeks, Israel-1 has 2,048 Nvidia chips and is now in use by the company’s research and development teams, along with selected partners; it is housed in Nvidia’s Israeli data center.
In the fierce AI chip rivalry, Nvidia is leaps and bounds ahead. The result? A $1.2 billion market cap for Nvidia, leaving Intel trailing at a mere $180 billion. And it is Mellanox engineers who have helped lead Nvidia’s AI chip success.
Israel is fighting a war on several fronts, struggling to free over 100 hostages while suffering from a dysfunctional government led by a chronically indecisive narcissist prime minister. Let the chips fall where they may – they are the least of our problems.
Gelsinger returns
Someone once remarked, “If you’re in hi-tech, you’re in trouble.” Intel was in trouble. Forbes magazine reported that in 2022, Intel had a $664 million net loss for the year, a 32% year-over-year revenue decline for the fourth quarter, and a 20% decline in annual revenue year over year.
The company knew it needed a new direction. On February 15, 2021, it appointed Pat Gelsinger as CEO. Gelsinger, a religious Christian, had a 30-year career at Intel before leaving in 2009 to run EMC and then VMware.
Gelsinger initiated from day one a program he called IDM 2.0 (integrated device manufacturer). It opens the company’s chipmaking capabilities, once closed, to outside customers. Gelsinger moved to expand Intel’s semiconductor capacity, including the proposed new Fab 38 in Kiryat Gat. Intel sought tax cuts and grants from governments in the US and internationally to fund the program – and Israel responded, among others.
Forbes magazine argues that it is the semiconductor foundries that are bringing the most innovative semiconductor manufacturing advances to market, especially TSMC. Gelsinger saw that Intel would have to compete directly with these foundries to regain its process technology leadership.
And, as in the past, Israel was ready.
When the dark clouds clear, both Intel and Israel will see better days. Creative Israelis may yet lead Intel back to its once-primary place in world chip design and production. Fab 38, too, will play a role.
In 1991, Intel launched a creative marketing initiative, Intel Inside, putting little stickers on computer keyboards and boxes and running ads during the Super Bowl to make buyers aware they were buying not just Dell or IBM but Intel microprocessors, too. The campaign built a strong Intel brand. Intel may be inside our laptops. But Intel is also inside Israel – and has been for 50 years. And, happily, in a very real sense, Israel is inside Intel, too. ■
The writer heads the Zvi Griliches Research Data Center at S. Neaman Institute, Technion. He blogs at www.timnovate.wordpress.com.
