For Intel, the country’s largest single tech employer, a strong relationship with Israel was always in the cards – or rather, in the chips. Although few remember now, nearly fifty years on, it was an Israeli engineer working for Intel in California, Dov Frohman, who in 1972 paved the way for computing as we know it when he invented the EPROM, the ultra-violet light, erasable, read-only memory chip that eventually led to the creation of flash memory.
Frohman’s accomplishment, as well as other important Intel Israel milestones, now live again, with the collation of a large number of photographs that lay out the history of the company – from its first Israeli office, opened in 1974 (with Intel hoping to find more Frohmans), until today, when the company has nearly 10,000 workers in half a dozen development centers and fabrication plants around the country. The photos were collated by Intel Israel’s public relations department in honor of Independence Day.
Intel’s presence in Israel is set to get even bigger than ever, with the signing of a deal between the company and the Finance Ministry last September. Under the deal, Intel committed to refurbishing its Kiryat Gat chip fabrication plant to produce the company’s newest generation of chips, in return for substantial tax breaks.
What would Israeli tech look like without Intel? It’s impossible to know, of course, but chances are the picture would be dramatically different.
Speaking at a recent Intel Israel event marking the company’s 40th year in Israel, outgoing Intel Vice-President Mooly Eden cited research conducted by Intel that shows the impact of the company on the Israeli economy. “If Israel is the Start-Up Nation, it’s Intel that had a major role in getting it there,” said Eden, citing a list of a list of hundreds of companies, large and small, that were led by entrepreneurs and developers who got their start at Intel. The study shows that some 10,000 former Intel workers have gone on to help establish 30 new high-tech companies every year – creating 250 new jobs.
Intel Israel is also a prolific exporter. “One billion chips can’t be wrong,” Eden said, citing the estimated number of microprocessors and processor components Intel Israel has manufactured at its chip fabrication plants – mostly at its two Kiryat Gat facilities – over the past 40 years.
“Intel is Israel’s ‘smart chip.’ We have had 40 great years together and are looking forward to the next 40. For four decades, Intel has spearheaded Israeli high tech, conceiving and developing novel technologies which have placed Israel on the global high tech map and enhancing the strategic leadership of Intel Corporation. The combination of Israel’s capabilities, Intel’s global innovation and ongoing investment in human capital resulted in an unprecedented success story which will continue to unfold in coming years,” said Eden.
Five years after it gambled on an Israeli operation, Intel’s investment paid off – big-time – as the team developed the 8088 processor, which was the heart of the IBM PC, the first computer to use Microsoft DOS (Disk Operating System) for an operating system. Because so many were sold, all three parties to the PC – Intel, Microsoft, and IBM – made huge sums of money, but it also cemented at least two of those companies to the future success of what would eventually become Windows-based computing. Only IBM fell behind, as commodity computer manufacturers in the Far East built computers mostly based on the 8088, using a generic copy of DOS instead of PC-DOS, which only the more expensive IBM computers needed.
From the 8088 it was a short developmental leap to the creation of the MMX chip (which powered the Pentium II computers), and the MMX’s modern descendants – Banias, Marom, Yonah, Centrino, and Sandy Bridge and Ivy Bridge, the processors used in most desktop and laptop computers today.
After signing a new deal with the government last year, Intel is set to produce its latest generation of chips and processors in Israel. Under the deal, Intel will be making the biggest-ever one-time investment in Israel, spending $6 billion to upgrade its Kiryat Gat plant for the production of next-generation computer chips. In return, Intel will get grants of up to $600 million over the next five years, as well as a major tax break through 2023.
More valuable for Intel is likely to be the fact that it will have to pay a corporate tax of only 5% through 2023 (the standard rate of company tax in Israel in 2014 was 26.5%). In return, Intel committed to hiring at least 1,000 new employees, at least half of whom will be residents of communities in southern Israel. In addition, the company promised to spend a total of at least $550 million over the period.
While some might point out that Intel is basically committing to spend what it is getting from the government in direct grants, Economics Ministry officials were enthusiastic about the benefits of the deal to the Israeli economy. “This arrangement will have a very positive effect on hundreds of small businesses and suppliers,” said Ziva Eiger, director of investments at the Industrial Cooperation Authority.
“Offset agreements such as this are platforms for leveraging public expenditures for the benefit of the Israeli economy, both for training and encouraging further expansion of small suppliers for the local and world market, and to enhance Israel’s brand as an attractive place for foreign investment,” Eiger added. As a result of this agreement, Israelis can look forward to thousands of more jobs being available. It is a model for offset agreements that can provide benefits to all sides.”
Besides, said Eden, such deals are very common among countries – like Israel and Ireland, which competed for the new Intel upgrade. “The government here, like governments everywhere, knows how the game is played,” and the jobs that are generated by investments in development centers are well worth it for Israel – especially when it comes to Intel, Eden said in a recent interview. “Over the years Intel has invested $10.8 billion in Israel. Last year, Intel Israel was responsible for more than 9% of Israel’s tech exports, which account for half of overall exports, except for diamonds.”
Regardless, the deal is done, said Maxine Fassberg, General Manager of Intel Israel, and for Intel – as well as for Israel – it delineates the beginning of a new era of even greater cooperation between the company and the country. She called it “a clear expression of Intel’s further contribution to Israel’s economy, and to the development of new technology products in Israel, many of which Intel has assisted in.”