Quality Workforce Helps Growth of Israel's Electronics Industry
Intel's pioneering efforts help turn Israel into important semiconductor center
by Richard Bruner
In 1969, Dov Frohman, an American-educated Israeli, began working for Intel in California. While there, he developed the EPROM semiconductor, the programmable read-only memory chip that was the predecessor of today's flash memory.
A few years later, Frohman, whose long beard gave him the appearance of a biblical prophet, persuaded his Intel bosses to send him back to Israel where, in 1974, he opened a design center in Haifa, the first such center owned by Intel outside the United States. Its reported cost was $300,000. He knew, of course, that he would have access to a highly qualified workforce, particularly in the field of electrical engineering.
That was Intel's first venture into Israel. Since then, it has built two fabs there. Intel broke ground for the first, Fab 8, on the outskirts of Jerusalem in November 1981. That fab came on line in 1982. Today, it is the oldest operating fab owned by Intel. It makes embedded control, flash memory and more than 130 other products and also contains a development center. Total employment is 1,200.
The second facility, Fab 18, is located in Kiryat Gat, an hour's drive south of Tel Aviv, in a meadowland where shepherds still mind their flocks. Opened in June 1999 at a cost of $1.6 billion, Fab 18 was the largest private investment ever made in Israel. More than a third ? $600 million ? came from a government subsidy. It is one of five Intel fabs producing 0.18-micron chips, and employs 1,700.
Kiryat Gat is mostly tenements filled with working-class Israelis and immigrants from Russia and Uzbekistan. Although everyone in the town dreamed of working for Intel, only about 15 percent of the labor force actually came from the community. The rest are from the surrounding region. One reason is that local residents lacked experience or adequate training and another was that the town's English-speakers are few and far between. To help bridge the training gap, Intel initiated a nine-month training course and hired 90 graduates. Meanwhile, the fab's establishment led to the creation of 50 new companies in Kiryat Gat to serve Intel's needs.
Other American companies followed Intel to Israel. Not far from the Intel Haifa development center are R&D facilities owned by Microsoft, Motorola, Cisco and 3Com.
The only other American company to build a chip manufacturing facility in Israel was National Semiconductor, which built a fab in Migdal Haemek, east of Haifa in 1978. However, in 1993 the company decided to consolidate most of its operations in the United States and sold its Israeli fab to Tower Semiconductor, which turned it into a foundry. Today, only Intel and Tower operate semiconductor fabs in Israel.
<http://www.semi.org/web/wmagazine.nsf/4f55b97743c2d02e882565bf006c2459/188d4c83fdfbf16488256a7700757e4b/CmagBody/0.B64%21OpenElement&FieldElemFormat=gif> Tower's Israeli co-CEO, Yoav Nissan-Cohen, had been part of the team managing the National fab before taking over its leadership. Before working for National, he had been in General Electric's R&D center in upstate New York. National helped him find investors to take over the fab.
When Nissan-Cohen took over Tower, the fab was processing only 20,000 six-inch wafers a month. "The technology could produce down to only 0.35 micron," he recalls. "So, of course, we were not able to compete." Therefore, in 1996, Nissan-Cohen sought out some investors, including SanDisk, Alliance Semiconductor, QuickLogic and Mactronix. "We managed to procure $1.1 billion to be able to start building a new facility, Fab 2, to take us into the future. The deals were closed in January. We also got an agreement with Toshiba to receive 0.18-micron technology. We will install Toshiba technology together with our specialized technology ? we call it micro-flash ? which is unique because it offers four times the density of any flash system today. When we implement this at the 0.18-micron facility, we'll be able to build a flash in an area of about 0.1-square-micron, which other people are not able to do. This is why we were able to attract the investors we did."
Financing also included a $250 million cash grant from the Israeli government and a $550 million loan from an Israeli bank. Tower expects Fab 2 to be in production by March 2002.
Currently, Tower employs 1,000, of which 700 work in Fab 1. Another 300 are helping set up Fab 2. By the end of the year, Nissan-Cohen said, the company will have a total of 1,500 employees.
In some areas, Tower has had to bring in a few specialists from outside the country, "but in most cases, there are many, many Israelis who are very experienced in semiconductor technologies," said Nissan-Cohen. "We can hire Israelis and also bring back some Israelis who are working in the semiconductor industry in the United States and other places."
Intel's pioneering efforts in Israel have turned the country into an important semiconductor center. "Between eight and 10 percent of the world's semiconductor chip designers are in Israel," said Nissan-Cohen, noting that they work for Intel, National Semiconductor (which continues to operate a design center in Tel Aviv), Motorola and others. "There are also tens of thousands of Israelis in Silicon Valley; many are interested in coming back to Israel."
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In general, Israel boasts a high-quality work force. "Practically everyone finishes high school, which means you have many high school graduates with knowledge of English, the official operating language for fabs," said Nissan-Cohen. "We are also hiring people who came during the immigration wave from Russia. In many, many cases, we have been able to put immigrant engineers into technician's jobs."
Israel's university system includes Technion (supposedly the Massachusetts Institute of Technology of Israel), located in Haifa, and Tel Aviv University. "Israel has the largest number of university graduates per capita in the world," said Nissan-Cohen. "Thus, Israel has thousands of new start-ups. After the United States and Canada, Israel has the largest number of high-tech start-ups in the world. There is lots of activity in optical switching devices for optical communications. And a huge activity in chip design."
With a marketing and sales office in Silicon Valley, Tower exports about 80 percent of its products to the United States. "Most of the rest goes to the Far East. Europe has been relatively slow using foundries. We are moving more and more into Europe." Its customers in the United States include Motorola, National Semiconductor, STMicroelectronics and Mactronix.
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