The War Forged Israel’s Chip Industry: How Adversity Drove Innovation

  It is described in “Samsung Empire” that the opportunity that prompted Li Bingzhe to invest in the electronics industry was the oil crisis in the 1970s. Due to the huge shortage of crude oil caused by the Middle East war, Li Bingzhe realized that he was in a resource-poor South Korea, which was less dependent on resources and had higher added value. The electronics industry may be the future of Samsung.
  Compared with South Korea, the situation in Israel is even worse. Not only is it short of oil and mines, but even water resources are a problem, and it also faces Arab countries that are eyeing from three different directions.
  From a certain point of view, Israel’s development path is quite similar to that of South Korea, and even far exceeds that of Koreans in some aspects. As written in the preface of “The Nation of Entrepreneurship”: The only capital we can freely control is people. But this barren land will not be overwhelmed by financial development, only by people who ask for little and dare to pioneer. This population is less than 10 million, and the whole country is within the rattlescout. Tower Semiconductor, one of the top ten fabs in the world, and Mobileye, an autopilot chip company, were born in Nasdaq. The number of companies listed on Starq ranks third in the world.
  In June of this year, Israel announced the largest foreign investment in the country’s history: Intel will spend 25 billion US dollars to build a fab in Israel, which is close to the US “Chip Act”, which promises to subsidize all semiconductors half of the total amount of the enterprise.
  Not long ago, Nvidia also announced that it is building the most powerful AI supercomputer in Israel, and is already working with 800 startups and tens of thousands of software engineers in Israel.
  Why did a place ravaged by war and hatred become a battleground for semiconductor companies?
Entrepreneurs who have been to the front line

  In the early morning of June 5, 1967, the officers and soldiers of the Egyptian Air Force Base near the Suez Canal were still undergoing early shift handover work. Israeli warplanes quietly appeared over the base and strafed the airport runway and Egyptian fighter planes.
  Immediately afterwards, the Israeli ground forces also sent tanks and armored vehicles to attack Egypt’s Sinai Peninsula near the Israeli border.
  At the same time, in a hub area called Glilot in Tel Aviv, Israel, the intelligence unit code-named 8200 was also operating in the rear. On this day, they successfully intercepted the confidential hotline phone calls of Egyptian President Nasser and Jordanian King Hussein, and mastered the Arab secret service. The next step of the coalition forces.
  In the end, the war lasted only six days, and ended with the overwhelming victory of the Israeli army and the defeat of the Arab coalition forces, so it was also called the “Six-Day War”. The 8200, which made great contributions on the first day of the war, could only use military equipment eliminated by the US military. However, after the war, the status of 8200 rapidly improved and began to develop rapidly.
  Due to its location in the encirclement of Arab countries, Israel is one of the few countries in the world where all citizens serve in the military, and women are also required to serve. 8200 will select about 100 technical talents from the annual recruits to conduct intensive training in computer coding and hacking skills, and undertake intelligence collection and deciphering tasks.
  After five Middle East wars, large-scale military conflicts have died down, but technological progress has never stopped.
  Another identity of the 8200 is Israel’s high-tech industrial engine. Most of the elite non-commissioned officers of the 8200 chose to go to sea after retiring. “Forbes” made a statistic that more than 1,000 high-tech companies came from Israel’s 8,200 troops. “The Nation of Entrepreneurship” once described:
  In Israel, to some extent, a person’s academic experience is not as important as his experience in the army. One of the questions that must be asked in every interview during the job search process is: What branch of the military did you serve in?
  After the Yom Kippur War in 1973, two professors from the Hebrew University proposed a new plan to the Israeli military: Israel must have an absolute advantage in science and technology in order to make up for the small number of people.
  During the Yom Kippur War, Egypt’s surprise attack caught Israel off guard. Israel lost as many as 2,800 people in battle and lost the Sinai Peninsula it had snatched from Egypt. Although the two sides had a truce under the mediation of the United States, the war greatly dampened Israel’s self-confidence since the Six-Day War, which is also the background of the birth of the Talpiot plan. Similar to 8200, Talpiot screens 2% of the top high school students every year and eliminates 90% in a series of tests. Those who stay in the end will enter the army, dedicated to the research of basic science such as mathematics and physics.
  If they can successfully graduate in the army, then they will become a real Talpion – this word comes from the Bible, referring to the tower of the castle, symbolizing the highest achievement. To date, the project has produced only 650 Talpions, but almost all of them have become Israel’s top academic experts or founders of high-tech companies. This investment in military power regardless of cost has allowed Israel to mass-produce a large number of high-tech talents. In 1974, a year after the Yom Kippur War, Israel welcomed perhaps the most important investor in the history of its high-tech industry: Intel.
intel brought up kids

  In 1974, Intel opened its first chip research and development center outside the United States, located in the port city of Haifa in northern Israel. The head of the R&D center is an Israeli named Dov Frohman.
  Frohman was born in Amsterdam on the eve of World War II. Both his parents died in Nazi Germany’s massacre of Jews. Frohman was hidden in a Belgian farmer’s house until he was discovered by distant relatives in Israel after the war.
  After serving in the army, Frohman entered the Israel Institute of Technology, known as “MIT in the Middle East”, and then went to the United States to study for a master’s degree. After graduation, he joined the famous Fairchild Semiconductor.
  In 1969, Frohman, who received his Ph.D., followed the Intel giants Gordon Moore, Robert Noyce, and Andrew Grove to join Intel, which he founded the previous year. In more than 30 years at Intel, Frohman’s greatest contribution was the invention of EPROM.
  In the early days of Intel, the ROM (read-only memory) on the market was still not programmable, that is, the stored data could not be modified and customized.
  In 1971, Frohman invented the first EPROM (Erasable Programmable Read-Only Memory) for the just three-year-old Intel, which could erase data with ultraviolet light and reprogram the chip.
  In Gordon Moore’s eyes, EPROM is as important as CPU. The flash memory technology that was born later was also developed on this basis. As an inventor, Frohman’s status is self-evident. In 1974, the successful Frohman decided to return to China to build his hometown, and simply persuaded Intel to start a company in Israel.

  At that time, the storage business that Intel started was beaten by the Japanese and could not take care of themselves, so it was forced to turn to the research and development of microprocessors. The Haifa R&D team led by Frohman lived up to expectations and designed one of Intel’s milestone products in 1980: the 8088 chip.
  Due to its small size, the 8088 is the first CPU for the PC market in the true sense. In 1981, IBM launched the IBM PC equipped with Microsoft MS-DOS and 8088 chip, which was a great success.
  The Israelis are proud of this. Local entrepreneur Jon Medved once joked that Intel should replace the slogan “Intel Inside” with “Israel Inside”.
  Intel then struck while the iron was hot and built its first fab outside the United States in Jerusalem, responsible for the production of the 8088’s successor, the 386 chip. During the Gulf War, when Scud missiles would fall on Haifa and Jerusalem at any time, the Israeli factory, as the main supplier of 386 chips, delivered all orders on time. Accompanied by this tightly bound relationship, Israel has gradually become Intel’s most important R&D center outside the United States, and Intel’s investment and mergers and acquisitions in Israel have become more frequent, such as the self-driving chip company Mobileye and the chip manufacturing company Tower Semiconductor.
  Over the years, Intel has invested in more than 30 companies in Israel, with a total amount of tens of billions of dollars. For a long time, Israel has owned about 8% of the world’s chip design talents and design companies. In the chip industry, a chip design company is likely to acquire any actual product by a large company for defensive or technical reserve purposes. For large companies, instead of developing from scratch internally, it is better to directly purchase established start-up companies as the basis for development.
  This is why, after Intel, large technology companies such as Microsoft, Samsung, and Apple successively established R&D centers in Israel.
  For these companies, talent is more important than cash in hand. Except for Silicon Valley, it is likely that only Israel can satisfy them.
Where there is genius, there is capitalism

  When Apple designed the first mobile phone processor A4, it hired Johny Srouji, an Israeli who had worked at Intel for more than ten years. Like Frohman, Johny Srouji graduated from the Israel Institute of Technology. After joining Apple, he quickly became the No. 1 figure in the chip department and took the helm of the chip R&D center in Tel Aviv. Apple executives”.
  Johny Srouji really rarely shows his face. The last time he made a public appearance was WWDC in 2020. Johny Srouji announced in the video that the Mac product line will completely eliminate the processors of his old company Intel, which is extremely insulting.

  Most of the chip engineers active in Israel have worked for Intel, then left to start a business, and then were acquired by Intel or other technology companies. Nvidia’s $6.9 billion acquisition of Mellanox is a typical example.
  There are also a considerable number of people who leave their jobs to start businesses after working for a few years, and they have become the new generation of innovative forces in Israel.
  Among them is a chip designer named Eyal Waldman, who founded a far-reaching chip company in 1999: Mellanox, which is in part the basis for the explosion of large language models.
  Eyal Waldman, the founder of Mellanox, fought in the Lebanon War with the army at the age of 22. After retiring from the army, he entered the Israel Institute of Technology for further study, and then worked at Intel for 5 years.
  In 1999, Eyal Waldman founded Mellanox. The flagship product is a wireless bandwidth technology called infiniband. Due to its extremely high data throughput and extremely low latency, infiniband is very suitable for data centers for AI training.
  In 2020, Intel, Microsoft, and Xilinx offered an olive branch to Mellanox at the same time, but they were eventually acquired by Nvidia. Nvidia later launched the famous DPU (data processor), which was hatched from within Mellanox. The DPU is built into the AI ​​data center, which can improve network performance, and cooperate with high-computing GPU to support larger-scale large-scale language model training, thereby shortening the training time.
  After the acquisition of Mellanox, Nvidia immediately brought more than 1,000 of its engineers under its command. At present, Nvidia has opened a total of 7 R&D centers in Jerusalem, Tel Aviv, Beersheba and other places, employing nearly 3,000 people. Eyal Waldman, who sold the company, chose to take the money and leave to become an angel investor full-time.
  This is the path most Israeli tech companies have taken: resign from a large company and become the boss—target a cutting-edge technology field—and sell the company to a large company. Most of the acquired companies have similar characteristics: strong technical capabilities, but almost no sales and operation capabilities, and even no formed products. Anobit, which Apple acquired in 2011, is a prime example. The core technology of Anobit is the flash memory controller. The main selling point is low power consumption, while supporting particles with a process below 20nm, which perfectly fits the needs of mobile devices.
  At that time, Apple just released the iPad product line, and at the same time planned to replace the storage devices of the Mac product line with flash memory chips. It’s hard not to suspect that Anobit was created to sell to Apple.
  There are countless similar stories. Israeli companies often gamble to target very cutting-edge technological fields, such as AI and autonomous driving, and then seek safe exit after the technology matures, which also makes Israel a mecca for venture capital.
  According to statistics, one-third of Israeli companies exited through listing, and two-thirds exited through acquisitions, most of which were acquired by American companies. The minute Israel’s techies walk out of the military and universities, American corporations, rich and powerful, are drawing up the terms of mergers and acquisitions. Therefore, the core of the progress of the high-tech industry represented by chips in Israel is the talent delivery system composed of the education system and technology industrialization, and it does everything possible to squeeze out the value of everyone. Of course, the solution is not to have techies with mortgages working 80 hours a week, but to try to push the ceiling of their creativity and sell them for a good price.

Japan and Korea at the same time

  The 1970s, when the Israeli chip industry started, was also the era when the electronics industry in East Asia took off.
  Relying on the concentrated research of industry, academia and research led by the Ministry of International Trade and Industry, Japanese memory chips surpassed the United States at the same time and reached the top of the world in the 1980s. However, during the recession in the 1990s, South Koreans have successively defeated such advantageous projects as storage, panels, and chip manufacturing, and they have maintained an astonishing advantage until today.
  The take-off of the electronics industry in East Asia largely depends on industrial upgrading driven by export trade under the leadership of industrial policies, that is, the East Asian model. Colleges and universities all over the country are mass-producing science and engineering talents, which are continuously transported to the industrial sector.
  The advantageous industries of East Asian economies often have a characteristic—their technological progress is often concentrated in the manufacturing process to serve large-scale standardized production. Whether it is a panel or a memory chip, due to the high standardization of products, their core competitiveness is the reduction of production costs in exchange for scale, rather than pure technological progress.
  In this context, East Asian economies with a strong central government, high savings rates, and a large amount of cheap labor have become the main battlefield of Moore’s Law. Young people trained through standardized education have supported the blueprint for industrial development generation after generation. . And these characteristics, Israel does not have.
  Therefore, in the golden age of integrated circuits, the Israelis chose another way.
  The more cutting-edge technology, the higher the importance and added value of an individual—for example, Jim Kaller, another behind-the-scenes hero of Apple’s core manufacturing, has worked in Apple, AMD, Intel, and Tesla, and worked in every company. The company has left legendary works. In the same way, if Geoffrey Hinton did not choose Google in 2013, but joined Microsoft or Baidu, the history of deep learning may have to be rewritten again. At least for Apple, which was conquering self-developed chips in 2009, including Johny Srouji may be more valuable than recruiting 10,000 integrated circuit graduates.
  This is also the idea of ​​Israel – instead of training 10,000 graduates into qualified industrial workers, they would rather let 9,999 people do nothing, and bet that the remaining person is Johny Srouji.
Thank you, Charles de Gaulle

  During the Six-Day War in 1967, former French President Charles de Gaulle suddenly announced the suspension of arms supplies to Israel, which was regarded by the Israelis as their own Sputnik moment.
  The background of this matter is that in 1960, France promised to provide Israel with 200 AMX 13 tanks and 72 “Phantom” fighter jets within 10 years. At the time, France was Israel’s most important arms supplier.
  In 1967, however, French diplomacy shifted towards maintaining stable relations with the Arab world. Subsequently, Georges Pompidou, de Gaulle’s successor, gave 200 AMX tanks to Libya, and also transferred the 50 “Phantom” fighter jets that Israel had paid for to Israel’s enemy Syria.

  The description in “The Nation of Entrepreneurship”: France’s betrayal made the Israelis wary, and they agreed that they could no longer rely on foreign weapons supplies so much. This eventually led to the birth of the Lion fighter and the Merkava tank.
  Although the Lion fighter project was later cancelled, unemployed engineers flowed into technology companies in batches, and a large number of talents were released into the market environment at once. A large number of independent military research and development work injected valuable experience into the technology companies at that time, which indirectly promoted Israel quickly kept up with the wave of integrated circuit technology after the 1970s.
  There are many paths to high-tech breakthroughs, but in Israel, it is the haze of war, barren land, Hamas rockets flying over Jerusalem, and the almost pathological production and absorption of technical talents. Just as Jussi Vardy, who invested in ICQ, the originator of instant messaging software, said: The
  real creators of Israel’s high technology are the Arab world and Charles de Gaulle, who forced us to develop our own industry.

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