Israel seen as major player as global chip war intensifies

AuthorUri Berkovitz
Publication Date08 Apr 2021
Frank's recruitment is just a very small part what's happening in the semiconductor world - "an explosion" as one industry insider termed it. All of the major high-tech companies have chip development activity. Intel has always had a presence in Israel, but recently, Apple, Amazon, and Microsoft also began developing chips in Israel. Now Google is joining the party. "Globes" has also learned that Facebook plans setting up a chip development fab in Israel. Not only are the tech giants extremely competitive but Israel is becoming their main playing field. In fact, almost all chip developers have an Israeli presence, and for some, this activity is their most significant outside of their home countries.

Develop more, produce less

There are several veteran chip development operations in Israel. Intel develops its central processing units (CPUs) for personal computers, data centers, and networks, in Israel.

Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE: TSEM), a long-standing analog chip fab, is headquartered in Migdal haEmek. Israeli companies Nova Measuring Instruments Ltd. (Nasdaq:NVMI; TASE:NVMI) and Camtek Ltd. (Nasdaq: CAMT; TASE:CAMT) are world leaders in the development and production of machines that perform quality control - a critical step in the production process. About two years ago, testing colossus KLA of California acquired veteran Israeli company Orbotech for $3.4 billion. Applied Materials is another dominant testing company with significant operations in Israel, both in development and production. The two largest electronic design automation (EDA) software companies in the world - Synopsys and Cadence Design Systems - also have development centers here.

There are also others. Apple, for example, is developing its LiDAR sensors for iPhone and autonomous vehicles in Israel.

Amazon conducts most of its global semiconductor development for cloud-based machine learning in Israel. This week, TheInformation.com reported that Amazon will begin developing a new networking chip for its server farms here. Microsoft's activity in Israel is smaller scale, developing networking chips for data centers. Unrelated to that, Microsoft is also expected to launch a data center very soon.

Cisco is developing its Silicon One chip, which enables data centers to meet the constant increase in data consumption, based on technology developed by Israeli startup Leaba Semiconductor, which it acquired in 2016. Qualcomm also has a development center here. Samsung is well represented in Israel. Sony acquired Hod Hasharon-based Altair (now Sony Semiconductor Israel), which develops energy-efficient cellular communication chips for the Internet of Things (IoT).

Cloud companies need specialized chips

Like Amazon and Microsoft, Google has long been more than just a major player in internet or software. These three are also the three largest cloud companies in the world. As such, in recent years, they have been working on developing proprietary chips that will either provide competitive advantages over other cloud providers, or be used for internal purposes. Even Facebook has tried its hand in collaborating with Intel.

The prevailing wisdom in today's tech world is that hardware/software integrations are a cheap way to gain more performance. The major players have concluded it's best to maintain control of critical hardware development as well as keep IP close to the chest. In-house development is important for providing better customer service and also saving on energy costs. Applied Materials forecasts that by 2025, data centers will account for 15% of global electricity consumption, up from a mere 2% in 2020. In essence, chip energy efficiency has become as important as performance.

In recent years, says Psagot Investment House analyst Shahar Carmi, "The global chip industry has exploded with a wave of increased demand and headed towards $400-500 billion [turnover] a year. I hear the CEO of Tokyo Electron predicts that by 2030-2031 it will reach a trillion dollars."

"Now, after a long consolidation process, the level of competition and...

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