Internet of Things will be a backbone of Israeli tech, says expert

The “Internet of Things” (IoT) has set the tech world abuzz as the new Next Big Thing, and everyone – from the software developers to the user interface designers – is rushing to claim their stake as the ones who are “making it happen.”

But while you need software, UI, and a dozen other things to turn a dumb refrigerator into a smart one that connects to the Internet, none of it is going to matter unless the chips that go into that refrigerator can communicate, upload and download commands, and function for months or years without requiring a change of batteries, according to Shlomo Gradman, CEO of ASG Ltd. and chairman of the Israeli High Tech CEO Forum.

Gradman was speaking at ChipEx 2015, the largest annual event of the Israeli microelectronics industry, which was held last week. The semiconductor industry, which is out in full force at ChipEx, has had its ups and downs in recent years, admits Gradman, but IoT is a major game-changer that could become “a major growth engine,” he said.

Actually, the chip industry in Israel had been doing fine even before IoT came along, he said. “I know the perception has been that semiconductors were long ago eclipsed by other areas, like mobile and networking technology, and that there was no way we could compete with China and India because of the economies of scale advantage they have over us, but semiconductors have always been there below the surface.”

Just ask Apple, said Gradman. “They acquired Anobit and PrimeSense, two companies whose main activity was chip design, and hired hundreds of chip designers who were let go from other companies, like Texas Instruments.”

All this happened over just the past three years – before which Apple had no Israeli presence at all, said Gradman. Now Apple has more than 700 engineers in Israel, and is planning to hire more – “and all of them are working are chip design.”

And if the growth of Apple Israel wasn’t a convincing enough development for those who eulogized the Israeli semiconductor industry, there’s MobilEye, the Israeli company that makes vision warning safety systems for drivers. Now standard in almost all new cars by manufacturers around the world, MobilEye’s system – and the company’s main business – is based on chips. MobilEye’s $800 million IPO last year was the biggest in Israel’s history.

Even what appears to be weakness is actually strength. Reports that Dutch chip maker NXP was buying out Freescale Semiconductor for $40 billion was not an indication of weakness at Freescale – but of the strength of the industry. “You don’t spend that kind of money if business isn’t good, and if you don’t expect it to get better,” said Gradman. “If Freescale scaled down somewhat, as is it did in 2012 when it laid off workers, the engineers it let go were snapped up by other companies right away.”

And what’s in the past is in no way reflective of the future – again, thanks to IoT – according to Freescale Israel director Shmuel Barkan, who spoke about his company’s IoT future at ChipEx. “There are few companies as well positioned as we are to take advantage of the IoT future,” he said. “We make the chips, the sensors, and the software and integrate them all into the microelectronics that are used to control IoT devices.” Especially important, said Barkan, are microcontrollers, “which regulate the interaction between and machine, and the communications systems, including wifi and bluetooth, that connect them to the cloud.”

According to Israeli serial investor Isser Zak, Israel’s ability to bring together those elements is what will ensure that the country will remain an innovator in IoT. “Manufacturing is vulnerable to competition from the Far East, and there are many chip engineers in places like India but what Israel has is the talent to bring all the elements together – the design, the communications, and the chip technology. That is a combination you don’t find in too many places, and is what will ensure that Israel remains very relevant to IoT.”

According to estimates by companies like Intel, there will soon be some 50 billion IoT devices in the world – but the business, and Israel’s role in it, is still developing.

“If the forecasts are right, IoT should be a very important component of Israel’s tech economy in the coming years,” said Gradman. “The situation today is comparable to the way the Internet was a decade ago – there was a lot of talk and speculation, some of which panned out and some of which didn’t. But in the end a real industry sprang up – and that industry is very important to the world economy, and to the economy in Israel. That, I believe, is what is going to happen with IoT.”