65 years on, Israel is top choice for tech by multinationals

Some of the biggest global names in hardware and software are deeply involved in the local high-tech scene. The Start-up Nation has what to celebrate

Economics Minister Naftali Bennett; IATI CEO Karin Mayer Rubinstein; Dr. Beeny Zeevi Co-Chairperson of the IATI; Yoav Chelouche, Co-Chairperson of the IATI (Photo credit: Courtesy)
Economics Minister Naftali Bennett; IATI CEO Karin Mayer Rubinstein; Dr. Beeny Zeevi Co-Chairperson of the IATI; Yoav Chelouche, Co-Chairperson of the IATI (Photo credit: Courtesy)

A birthday is a time to celebrate the past and plan for the future – and there is plenty for Israel’s high-tech industry to celebrate on the occasion of the country’s 65th anniversary. Besides featuring a large start-up scene, Israel is home to dozens of R&D labs that belong to multinational tech companies, some of them the principal development facility for their parent corporation.

So, last week, Israel’s high-tech industry — in the form of the Israel Advanced Technologies Industry group — threw itself an Independence Day party in Tel Aviv, where representatives of of 17 R&D labs belonging to multinational companies (MNCs) talked about the innovations, accomplishments, and contributions they make to their parent companies. Hundreds of guests came, including Economics Minister Naftali Bennett and the ambassadors and diplomatic staff from no fewer than 41 countries, all of whom came out to learn the secret of Israel’s high-tech accomplishments.

IATI is an umbrella group that fosters communications between tech companies and lobbies for the industry. The MNCs in Israel are a major factor in Israel’s high-tech success, according to IATA CEO Karin Rubinstein, with their labs responsible for half of the high-tech jobs in Israel. Seventeen of the world’s top tech companies, including Microsoft, Google, Oracle, IBM, Yahoo, General Motors and Sears gave a briefing about their employers, the activities of their R&D labs, and how Israeli technology contributes to the bottom line of both their parent corporations and the state.

As befits those involved in a high-tech celebration, IATI officials bandied about some very impressive statistics about MNCs in Israel. Over 250 multinationals have research and development centers in Israel, 80 of them Fortune 500 companies, with a majority (66%) belonging to US companies. During 2011, international tech companies bought out 83 Israeli start-ups (many of which were either converted into or merged into existing R&D centers), with the buyouts amounting to $5 billion; meanwhile, during the first half of 2012, there were 50 buyouts, at a total value of $3.5 billion (not including the purchase of NDS by Cisco). Between 2002 and 2009, productivity by MNC units in Israeli grew by 121%, an average of 12% annually. This accounted for 15% of all business activity in Israel.

That statistic alone, said Rubinstein, shows that it is not only Israel that helps MNCs, but that the Israeli economy is stronger because of the country’s international connections. “The innovations demonstrated at this event by many of the multinational R&D centers in Israel demonstrate that Israel in not only a Startup Nation, but an Innovation Nation. The challenge for us, as an industry, and for the new government, is to continue to foster the growth of this vital part of our innovation ecosystem.”

Events like the one Rubinstein was hosting are relatively rare. MNCs are generally reluctant to discuss their day-to-day activities, and Israeli R&D units generally must get corporate permission before they discuss their contributions to their parent corporations. Just getting the heads of 17 R&D centers in the same room at the same time was a challenge, the IATI said — but it was worth it, as the presentations by many of the companies showed:

Intel: The granddaddy of MNCs to set up shop in Israel (which it did in 1974), Intel has seen its local branch become responsible for many of the company’s greatest achievements, said Gadi Singer, General Manager Intel Israel Development Centers. Among those accomplishments: the development of the first PC processor, the 8088 (used by IBM for its machines) in 1979 by Intel’s Haifa team; the Pentium MMX processor, released in 1997, which turned out to be the most widely distributed processor of the 20th century, and also developed in Haifa; development of the various generations of the Pentium laptop processors (Dothan, Banias, etc.), as well as the Centrino processor, the first laptop processor with wi-fi; development (in Haifa) and production (in Kiryat Gat) of the latest Intel tech, including Thunderbolt, Sandy Bridge, Ivy Bridge; and so on.

Besides innovating for the world, Intel Israel has had a major impact on Israel’s economy as well: Intel by itself in 2012 was responsible for 20% of all high-tech exports from Israel, and for 10% of country’s total exports in 2012, 20% of all high-tech exports. Intel alone was responsible for one third of all Israeli exports to China. Intel Israel employs nearly 8,000 workers directly, and is indirectly responsible, through suppliers and subsidiaries, for the employment of 23,000 heads of households. Altogether Intel employs 10% of all workers in the electronics and software industry in Israel. “And for the fifth year in a row, we have been voted the best place to work in Israel,” said Singer.

Google: Famous for its intense but informal work atmosphere, Google is a truly entrepreneurial company, with interests in far more than search, said Yossi Matias, Managing Director of Google Israel’s r&d facility. The local Google chapter has done a lot of work in search, said Matias, but not just. “We’re responsible for innovations like Google Suggest, Google In-Page Analytics, Youtube Annotations, and much more,” Matias said at the event. Suggest, as the name suggests, offers to autocomplete the search terms as you type in Google’s search box, like showing you the term “Israel” after you’ve typed in the i and s (saving you time and providing faster results); In-Page Analytics lets you quantify data about your web site; and Annotations lets you add interactive comments and text to videos.

Perhaps even more important, said Matias, was Google Israel’s work in digitizing text — a project that began with putting the Dead Sea Scrolls online, turning it into a searchable text that lets you see the actual scroll when you do a search. The project, started by a single engineer in Google’s Haifa office, has become the standard for more ambitious Google digitizing projects, with the Paris office using the system developed in Israel to digitize what will eventually be thousands of historic archives and documents.

HP: Intel Israel may be Israel’s biggest MNC employer, concedes Raffi Margaliot, General Manager of HP Software Israel, but HP isn’t too far behind. The company has 6,000-plus employees here, and has the distinction of being the biggest software development group in HP’s worldwide empire. “When I tell people I work for HP they usually tell me about their printer problems,” Margaliot joked with the crowd.

“But HP is a lot more than printing,” especially in Israel, Margaliot said. Perhaps the most prolific MNC in the country, HP has eight major facilities in Israel — one dedicated to the country’s local business (which is substantial), along with seven R&D centers, the results of buyouts by HP of Indigo (2001), Scitex (2005), Mercury (2006), Nur (2007), and others.

“Much of HP’s business is actually driven from Israel,” in the sense that HP Israel is deeply involved in the technology for the “four pillars” of HP’s activities — infrastructure, software, services, and solutions, said Margaliot. “Not only were we responsible for 55% of all HP software releases last year, but we are also ‘innovation exporters.’ Groups from other HP locations around the world come to see what we have done and how we have done it. We export not only products, but innovation.”’

Marvell: Less well known to many Israelis (and Americans), the story of Marvell Technologies Group’s involvement in Israel is unique among MNCs. Founded in 1995, Marvell is far younger than other semiconductor companies like Intel, but it has grown to include 7,500 employees — 1,200 of whom, or nearly 20%, are in Israel.

That presents unique challenges for the Israeli team, said local CEO Yossi Meyouhas. “Marvell has more than 16 international design centers located located outside the US, and we are the biggest one. We need to keep up and on top of things going on in Canada, Europe, India, Singapore and China, with our people traveling the world to collaborate on projects and designs.”

Perhaps most interesting is the background of the founders and directors of the company. “The three founders and top executives of Marvell are from Indonesia,” said Meyouhas. They grew up in the world’s most populous Muslim nation, then went on to advanced education in the US. “But their background has never affected their relationship with the Israeli operation. They are very loyal to us and very committed to what we have built in Israel.” In fact, Marvell has been so impressed with Israel that five of the nine companies Marvell has acquired since 2000 have been Israeli.

Which just goes to show, said the IATI’s Rubinstein, that when it comes to tech, Israel is on everyone’s map. “In honor of Independence Day, I can proudly say that Israel has truly achieved tech ‘independence,’ and that we have been recognized as a center of excellence by a record number of MNCs, who specifically sought out Israel as a location for their R&D operations,” said Rubinstein. “It’s a great honor for us that tens of millions of people around the world daily use the technology developed here for Intel, Google, and many other multinationals.”

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