Industry expert: ‘Intel, Broadcom, and Cisco are all Israeli companies’

Semiconductor chips are in style this year in Israel. Last week, it was announced that RFID chip maker AeroScout was on the verge of being bought out by a still-unnamed international infrastructure and services company, for as much as $240 million. If the sale goes through — and company sources indicate it will — it wouldn’t be the first successful exit of an Israeli chip designer/maker this year. In March, Broadcom bought Israeli network chip maker BroadLight for $195 million. And of course, there was the grandaddy of all semiconductor company deals — the purchase of Anobit for nearly half a billion dollars by Apple. And to add to the chip excitement, Apple recently announced that it would open a chip design center in Haifa.

As a result, there was a renewed energy at this year’s ChipEx2012 industry show in Tel Aviv. The show, held last week, featured offerings by over 100 Israeli companies involved in all aspects of semiconductor design and development, and panel discussions on the state of the fabless chip industry and Israel’s place in it. Visitors came not just to see the latest offerings by Israeli chip companies, but to hear industry experts, who participated in no fewer than 40 expert panel discussions covering nearly all aspects of the chip business.

Among the major concerns the experts stressed was the seeming falloff in investments and revenues in the Israeli semiconductor business last year. While there has been less venture capital investment, revenues overall in the chip business are up, said George Gilder, a technology guru who is one of the world’s most successful tech investors and unabashed fan of Israeli high-tech. “The semiconductor market today is more profitable than ever,” he said, although admitting that overall investments in chip companies are down. That is partially the fault of the still-fragile world economy. “When the economy starts to boom, there will be more IPOs and buyouts at high valuations,” Gilder added.

But Israel need not fear for its place in the semiconductor industry. The country’s successes are legion, and are greatly appreciated by the manufacturers who have come to rely on Israeli technology, Gilder said. “I feel that Intel, Broadcom, and Cisco are all Israeli companies, because all of their innovation comes from Israel.” Speaking to audience members representing start-ups in the chip industry, Gilder urged them to continue “Israel’s true role as a leader of industry technology.” This isn’t the first recession the world has experienced, and the semiconductor industry, and Israeli technology, survived and thrived, he added.

Would that it were so simple, said Shlomo (Sol) Gradman, CEO of ASG Ltd. and General Chair of ChipEx2012. Speaking at the conference’s executive summit, Gradman agreed that the past year — which included not only the Anobit acquisition, but the introduction by Intel of the Israeli-developed Ivy Bridge processor — had been a very successful one. But what’s past is past, and without proper preparation and proactive measures, the future may not look as bright. As processors get more powerful and smaller, designers and manufacturers are increasingly turning to nanotechnology, a development which significantly raises development costs for chips. If there are fewer companies producing chip technology in Israel today, it’s not for a lack of ideas, but for a lack of investment money, Gradman said. One way around that is to establish joint development ventures with corporations, or even countries, like Taiwan.

But the biggest challenge is finding engineers to supply needs of designers and semiconductor manufacturers. “We have good engineers but we need more of them and as it stands now the current education system is not ready to provide us with the quality and the quantity we need,” Gradman said at the conference. “In order to have good engineers and many of them we have to work with the government and make sure we have good education system including good elementary schools, high schools and good universities.” Beyond that, he added, “we need to improve the relations between the industry and the academic world,” encouraging research that could lead to the establishment of new technologies. “It’s about time we join hands and work together to ensure the future of our great industry and benefit from more possible successes which I’m sure will come if we do the right things,” Gradman added, expressing sentiments that no one on the panel, or in the audience, could disagree with.