The story of Israel’s semiconductor ecosystem is a remarkable tale of vision, innovation, and strategic government support. It began in the late 1960s and early 1970s, when global technology giants IBM, Motorola, and Intel established their chip design centers in Israel, laying the groundwork for what would become one of the world’s leading semiconductor hubs.

Early Beginnings: The Giants Arrive

Motorola’s establishment of its semiconductor operations in Israel in 1964, initially focusing on two-way radio communications, was pivotal. IBM set up its chip design center in Haifa in 1972, further embedding Israel into the global semiconductor industry. Intel’s journey in Israel started with the opening of its first overseas design center in Haifa, Israel in 1974. This center played a crucial role in designing the 8088 microprocessor, which powered the first IBM personal computers.

These multinational corporations brought advanced technology and expertise to Israel, creating a fertile ground for innovation and skill development. The influx of these tech giants not only provided employment opportunities but also fostered a culture of high-tech ingenuity that would shape Israel’s future.

Government Intervention: The Office of the Chief Scientist

Recognizing the potential of the high-tech industry, the Israeli government took strategic steps to support and nurture this growing sector. In 1965, the government established the Office of the Chief Scientist (OCS) under the Ministry of Economy. The OCS’s primary role was to support research and development in Israeli companies, particularly in the tech industry. It provided grants, subsidies, and other forms of financial assistance to startups and established companies, ensuring a steady flow of innovation and technological advancements.

The OCS’s initiatives were crucial in providing the necessary resources for fledgling companies to develop and commercialize new technologies. This support created a thriving environment for startups, encouraging entrepreneurs to take risks and innovate.

The Role of Incubators

In addition to the financial support from the OCS, the Israeli government established a network of technological incubators in the early 1990s. These incubators offered startups a nurturing environment where they could develop their ideas into viable businesses. The incubators provided office space, mentorship, administrative support, and access to a network of investors and industry experts. This ecosystem allowed startups to focus on innovation and growth without being bogged down by operational challenges.

The incubator program was instrumental in transforming Israel into a “Startup Nation,” producing numerous successful tech companies that have made significant contributions to the global semiconductor industry.

Encouraging Foreign Investment: The Birth of Venture Capital

The early 1990s also saw the Israeli government encouraging foreign investment in the country’s tech sector. By offering incentives and creating a favorable investment climate, the government attracted venture capital funds from around the world. This influx of capital provided the financial backing that Israeli startups needed to scale their operations and compete on a global stage.

The establishment of venture capital funds in Israel created a robust network of investors who were willing to take risks on innovative startups. This network pumped hundreds of millions of dollars into the Israeli tech industry, fueling its rapid growth and development.

Parallel Developments: Education, Universities, and the Military

Israel’s strong educational system, world-class universities, and advanced military training programs also played a significant role in the development of its semiconductor ecosystem. The country’s emphasis on science, technology, engineering, and mathematics (STEM) education produced a highly skilled workforce that was well-equipped to tackle complex technological challenges.

The Israeli Defense Forces (IDF) also contributed significantly by initiating development projects that advanced the country’s technological capabilities. Many tech entrepreneurs and engineers honed their skills in the IDF’s elite technology units, gaining valuable experience that they later applied in the civilian sector.

Current Standing: A Global Semiconductor Powerhouse

Today, Israel’s semiconductor industry is one of the strongest in the world, with an impressive track record of innovation and success. Eight out of the ten largest acquisitions of Israeli tech companies are semiconductor-related, highlighting the industry’s significant impact on the global market. Companies like Mobileye, Mellanox, and Habana Labs have achieved international acclaim, reinforcing Israel’s reputation as a semiconductor powerhouse.

Countries looking to grow their semiconductor industries often look to Israel as a role model for success. The combination of government support, foreign investment, a strong education system, and a culture of innovation has made Israel a leading force in the global semiconductor landscape.

Collaborative Opportunities

Israel’s semiconductor ecosystem is not just strong—it’s a global powerhouse. Companies that provide chip design solutions and services should see Israeli firms as high-potential customers for several compelling reasons:

Cutting-Edge Innovation and Expertise

  • Technological Prowess: Israeli companies are at the forefront of semiconductor innovation, driven by a rich history of breakthroughs from industry giants like Nvidia, Samsung, and Apple. Providing tools and services to these companies means partnering with some of the most advanced and innovative minds in the field.

 

Strong Market Potential

  • High Demand for Advanced Tools: With Israel’s vibrant startup culture and the presence of numerous semiconductor firms, there is a consistent demand for cutting-edge design tools and services. Companies that cater to this market can benefit from a steady stream of business opportunities.
  • Growth-Oriented Ecosystem: Israel’s ecosystem supports rapid growth and innovation, with many companies scaling quickly to meet global demands. This growth translates to ongoing needs for the latest tools and services in chip design.

Government and Institutional Support

  • Government Initiatives: The Israeli government, through the Israel Innovation Authority, provides substantial support to the tech industry, including grants and incentives for R&D. Companies offering chip design solutions can leverage these initiatives to expand their market presence.
  • Institutional Partnerships: Israel’s renowned academic institutions and research centers frequently collaborate with industry, driving advancements in semiconductor technologies. Partnering with these institutions through any companies’ tools and services can lead to groundbreaking developments and increased visibility.

Strategic Business Advantages

  • Collaborative Opportunities: Israeli companies are known for their collaborative spirit and openness to joint ventures. By providing tools and services, companies can form strategic partnerships that drive mutual growth and innovation.
  • Gateway to Global Markets: Israel’s strategic location and robust tech industry make it a gateway to American, Asian, and Middle Eastern markets. Establishing a foothold in Israel can facilitate broader market penetration and global expansion for any company.

Robust Industry Network

  • Established Industry Leaders: Many of the world’s leading semiconductor companies, such as Nvidia, Broadcom and Qualcomm, have significant operations in Israel. These companies set industry standards and can serve as valuable reference customers, enhancing any company’s brand credibility.
  • Venture Capital and Investments: Israel’s tech ecosystem is supported by a robust network of venture capital funds that invest heavily in semiconductor startups. By offering tools and services to these startups, companies can tap into a well-funded and dynamic market.

Proven Track Record of Success

  • High-Profile Acquisitions: Companies that provide essential tools and services to Israeli firms can benefit from the high level of industry activity and success.
  • Role Model for Global Semiconductor Industry: Israel’s achievements in the semiconductor sector have made it a role model for other countries. By engaging with Israeli companies, any company can align their brand with a globally recognized leader in semiconductor innovation.

In conclusion, companies that develop tools and services for chip design have much to gain by cooperating with Israel.

These companies can gain several benefits, from reliable and loyal customers to access to cutting-edge innovation. Companies looking to expand their market reach and drive technological advancements should consider Israel as a prime destination for their offerings.

Written by: By: Sol Gradman, Chairman, Israel’s High Tech CEO Forum & CEO, ASG Ltd. Sol Gradman will participate in the Emerging Tech Forum, organized for the fourth consecutive year by the Hellenic Association of Emerging Technologies (HETiA) and will take place on December 11, 2024, at the Grande Bretagne Hotel.

e-mail: solg@asgltd.co.il