Readers familiar with Israel should know that Israel is merely a "tiny country" with an area only one-third that of Chongqing and a population of less than 10 million. Israel has no oil, no fresh water, and is so resource-poor that it has nothing but sand, and has been plagued by wars for years.
However, it is in such a harsh country that there are about 200 chip companies, as well as the world's highest number of engineers per capita and the most high-tech startups per unit area.
A close look at the industrial structure of Israel reveals that the high-tech industry is the pillar of its economy, and the semiconductor industry, which accounts for 16% of high-tech product exports, is an eye-catching pearl, earning Israel the title of "Kingdom of Chips."
Israeli chip companies are being snapped up by semiconductor giants.
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In my previous article "Israel, Why Can It Become the 'Kingdom of Chips'", I wrote that Israel's semiconductor industry has a development history of more than 50 years and is one of the countries in the world with the most complete semiconductor industry ecosystem.
Among them, Israel has given birth to Tower Semiconductor, one of the world's top ten wafer factories, Altera, the world's second-largest FPGA chip company, and Mobileye, a giant in ADAS chips, with the number of companies listed on NASDAQ ranking third in the world.
In addition, large technology companies such as Intel, Nvidia, Microsoft, Samsung, Apple, Nvidia, and Marvell have successively established wafer factories and R&D centers in Israel. According to statistics, there are currently nearly 200 chip companies in Israel, and 8% of the world's chip designers and R&D centers are gathered here.
What is more noteworthy is that a large number of excellent chip companies in Israel have been or are being snapped up by international semiconductor giants.
For example, Intel has been acquiring Israeli technology companies frequently in recent years: In 2015, Intel acquired Altera for $16.7 billion; in 2017, Intel acquired Mobileye, an Israeli autonomous driving chip company, for $15.3 billion; in 2019, Intel acquired HabanaLabs, an Israeli AI chip startup; in May 2021, Intel will invest an additional $600 million in Israel to expand its research and development (R&D), and confirmed to invest $10 billion to build a new chip factory; in February 2022, Intel announced the acquisition of Tower Semiconductor, an Israeli chip manufacturer, for a total value of $5.4 billion, planning to expand its wafer foundry business scope, but the acquisition failed.Israel is also NVIDIA's second-largest R&D hub outside the United States. In 2020, NVIDIA acquired Israeli networking technology supplier Mellanox for $7 billion; in March 2022, NVIDIA acquired Israeli company Excelero to deepen its enterprise data storage business; in April of this year, NVIDIA acquired two Israeli AI startups, Run:ai and Deci, to build a more efficient and scalable AI ecosystem.
In addition, many industry giants, including Renesas Electronics and Qualcomm, have set their sights on Israel, completing countless acquisitions over the years, showing their preference for Israeli chip companies.
What's more exaggerated is that a chip design company may not even have any actual products and is acquired by large companies for defensive or technology reserve purposes.
Statistics show that one-third of Israeli companies exit through listing, and two-thirds exit through acquisition, most of which are acquired by American companies.
Israel's Chip Newcomers
According to reogma's data from 2016 to 2022, storage occupies the largest share of the Israeli semiconductor market, followed by power management ICs, logic chips, OSD (On Screen Display), and analog chips.
In addition to the well-known international companies, in recent years, with the wave of AI sweeping the world, AI chips, quantum computing, and optical computing technologies have quickly become one of the hottest focuses. As a leading chip country in the world, Israel has also seen the birth of many chip startups focusing on cutting-edge technologies in recent years, ushering in a new revolution in the chip industry.
Edge AI Chip Company Hailo Technologies
Israeli startup Hailo Technologies, founded in 2017 by Orr Danon and Avi Baum, focuses on chips for running AI workloads on edge devices.In May 2023, Hailo launched its first processor specifically designed for deep learning applications on edge devices, capable of supporting devices such as autonomous vehicles, smart cameras, smartphones, drones, and VR/AR realities. Unlike processors used in data centers, the most important features of this chip are its low power consumption, small physical size, low price, and great operational flexibility. The first batch of samples is about to be delivered to major manufacturers and suppliers in the automotive and camera industries for performance testing.
In 2018, Hailo Technologies secured $12.5 million in Series A funding, and in 2020, it completed a $60 million Series B funding round.
In April of this year, Hailo raised another $120 million, an extension of its Series C funding round, led by existing and new investors, including Israeli businessman Alfred Akirov, OurCrowd, Talcar, Comasco, and Poalim Equity. This brings the company's total funding to over $340 million.
It is understood that Hailo currently has more than 300 customers worldwide, covering various fields such as personal computing, automotive, security, and retail.
In addition to announcing the funding, Hailo also launched its latest product, the Hailo-10 GenAI accelerator, which allows customers to run generative AI applications locally without using cloud-based generative AI services. Hailo stated that it will begin shipping samples of the Hailo-10 GenAI accelerator in the second quarter of 2024.
Among popular GenAI platforms, the Hailo-10 is hailed as faster and more energy-efficient than integrated neural processing unit (NPU) solutions. The early applications of the Hailo-10 GenAI accelerator will target personal computers and automotive infotainment systems.
It is reported that Hailo has offices in the United States, Europe, Japan, South Korea, Mainland China, and Taiwan.
However, despite technological advancements and substantial funding, Hailo still faces fierce competition with industry giants such as Qualcomm, Arm, Intel, and AMD. The company needs to stand out by providing exceptional performance, energy efficiency, and ease of integration. In addition, it must also establish a robust software ecosystem and form strategic partnerships in its global target markets.
Hailo's CEO and co-founder, Orr Danon, said, "The completion of the new round of funding enables us to fully capitalize on all the exciting opportunities in our pipeline while laying the foundation for our long-term growth. Combined with the launch of our Hailo-10 GenAI accelerator, it strategically positions us to bring classical and generative AI to edge devices, significantly expanding the reach and impact of this outstanding new technology."He emphasized, saying: "We designed Hailo-10 to seamlessly integrate GenAI capabilities into users' daily lives, freeing them from the constraints of cloud networks. This allows them to utilize chatbots, co-pilots, and other emerging content generation tools with unparalleled flexibility and immediacy, thereby enhancing productivity and enriching life."
Quantum chip company Quantum Transistors recently received a substantial award of up to $19 million from the European Innovation Council (EIC), which includes an initial grant of $2.7 million from the EIC Accelerator and a future equity investment of $16.3 million through the EIC Fund.
This significant investment is the largest in the latest round of EIC Accelerator financing, highlighting Quantum Transistor's commitment to making quantum computing scalable and accessible. Among the 969 companies that submitted full proposals, Quantum Transistors stood out as one of the 68 companies selected for funding. The company will use this investment to expand its research and development scale and grow its burgeoning team.
In a statement, Quantum Transistors CEO Shmuel Bachinsky said, "This investment is not just financial support, but also a strong endorsement of our vision and technology. We are leveraging the trillions of dollars invested in the semiconductor industry over the past forty years to build scalable quantum technology so that society can ultimately benefit from its immense potential."
He emphasized that Quantum is trying to do for quantum computing what Intel 8086 did for traditional computing—making it more accessible to everyone. This funding will help us bring the same accessibility to quantum computing.
Quantum computing uses quantum bits (qubits) that can represent 0 and 1 simultaneously, while traditional bits have a value of 0 or 1. This allows quantum computers to process almost infinite possibilities simultaneously and perform calculations that traditional computers cannot.
As a result, chips can become powerful tools for solving complex problems in various fields such as cryptography, network security, drug development, as well as investment, weather modeling, and aviation.
However, despite the immense potential of quantum computing and the $55 billion invested globally to date, it is not yet a usable or practical tool. The current methods using photons, semiconductors, and atoms all face similar challenges: they require large, energy-intensive infrastructure, and the number of qubits they can provide is limited, making them extremely expensive and restrictive.
Quantum Transistors is addressing these challenges by developing an integrated universal quantum processor on a single chip. Native photonics is a key aspect of the company's approach, as each qubit is connected by photons, eliminating noise between qubits caused by proximity. This not only enhances computational power but also allows for deployment in standard data centers—greatly reducing costs and eliminating the need for large mainframes.High-Performance Microprocessor Company NeoLogic
NeoLogic is an Israeli computer technology startup founded in 2021. In July of last year, NeoLogic raised $8 million in seed funding. The company stated that this funding will help advance its computer chip technology to meet the growing workload of artificial intelligence (AI) tasks and machine learning.
NeoLogic has developed a unique computer chip design called Quasi-CMOS, which reduces the number of semiconductors required for a microprocessor by one-third. This means the company can efficiently develop microprocessors with higher computing power at a lower price.
Dr. Avi Messica, co-founder and CEO of NeoLogic, said: "Current microprocessors rely on (CMOS) technology from 40 years ago. Chip designers are struggling to meet current and future computing power and power consumption requirements. NeoLogic's technology breaks through the limitations of CMOS, reduces the complexity of digital circuits, and significantly improves cost-effectiveness and chip area. So far, we have submitted three patent applications."
The technology is expected to greatly help in the development of AI accelerators, which are computer systems specifically designed to accelerate AI and machine learning applications.
The $8 million seed funding round was led by Maniv Mobility Ventures, a venture capital firm based in Tel Aviv and New York, with seed funds such as lool ventures in Tel Aviv and M Ventures in Amsterdam also participating. NeoLogic also received support from the Israel Innovation Authority.
Nate Jaret, a general partner at Maniv Mobility, said: "We believe NeoLogic has a unique opportunity to bring profound changes to the way processor manufacturers design the next generation of chips, which will be more powerful, more energy-efficient, and also more affordable."
NeuReality: NAPU Chips Redefine AI
NeuReality, founded in 2019 and headquartered in Israel, is positioned as a disruptor of deep learning and artificial intelligence solution architectures.
It is understood that the company has redefined the AI-centric inference solution architecture and built the corresponding NAPU (Network Addressable Processing Units) chips, replacing the traditional CPU-centric AI inference solution.Compared to existing technologies, NeuReality's solution is specifically built for optimized deployment in data centers and near-edge local locations that require higher performance, lower latency, and greater efficiency. It will be widely used in fields such as public safety, e-commerce, social networks, and healthcare.
In March of this year, NeuReality raised $20 million in funding from the European Union's European Innovation Council (EIC) fund, which develops hardware systems that enable data centers and supercomputers to bypass Nvidia's GPUs and save on cooling power expenses. Varana Capital, Cleveland Avenue, Udi Angel's XT Hi-Tech, and Israel's OurCrowd also participated. These funds bring the total amount raised by NeuReality to $70 million.
It is reported that NeuReality applied for an EU funding program and received a grant of 2.5 million euros. Subsequently, the fund approached the company, requesting to participate in the next round of financing, planning to incorporate its products into the EU's investment strategy for chip companies, especially those that break away from dependence on American and Chinese companies. It is believed that the EU is interested in applying this technology to military and commercial uses.
NeuReality has partnered with chip giant AMD to develop a hardware architecture that does not require the use of Nvidia's expensive servers, which can make project costs as high as $500,000 and consume less power. The hardware focuses on the inference stage, where enterprises adopt off-the-shelf AI models and process existing organizational data on them. This stage is sometimes referred to as the "maintenance" or "activation" stage of AI, which usually uses Nvidia's processors after a complex and expensive activation preparation. NeuReality's inference chips are developed using 7nm technology and were mass-produced at TSMC last year.
ZutaCore, Leading the AI Chip Cooling Revolution
ZutaCore, a startup with its R&D center in Israel, is ready to lead the cooling revolution of artificial intelligence chips.
As a supplier of waterless direct chip cooling technology, ZutaCore is providing support for NVIDIA's H100 and H200 Tensor Core GPUs, aiming to help data centers achieve the maximization of sustainable artificial intelligence (AI) performance. Currently, several top server manufacturers are working with ZutaCore to advance the certification and testing of these GPU platforms.
Compared to its predecessors, NVIDIA's H100 GPU has improved performance by 30 times in accelerating large language models, while the H200 is hailed as the world's most powerful GPU, designed for enhanced AI and high-performance computing (HPC) tasks. Both are the top-performing chips to date, but the power consumption of a single GPU reaches up to 700W, which undoubtedly poses challenges to data center requirements such as cooling, energy consumption, and space occupation.
To address these challenges, ZutaCore has developed a waterless two-phase liquid cooling technology that directly acts on the chip—HyperCool, and this technology has been proven to provide cooling for processors with power exceeding 1500W, with an effective cooling capacity of 100 KW per rack.
Erez Freibach, CEO of ZutaCore, said, "The waterless, direct chip liquid cooling technology meets the specific cooling needs of the new generation of GPUs. This technology is particularly suitable for high-power GPUs of 1500 watts, while increasing the rack processing density by 300%. This technology not only avoids the risk of water leakage and expensive repair costs that may occur in water cooling systems but also can easily increase its cooling capacity without the need to upgrade existing power, cooling systems, and other infrastructure. This is revolutionary for promoting the future development of artificial intelligence (AI) and high-performance computing (HPC)."ZutaCore's HyperCool system employs a revolutionary closed-loop design that efficiently expels the heat generated by processors from servers under low pressure. This system is not only suitable for newly constructed data centers but also for the upgrade and retrofitting of existing data centers. It can enhance computational performance by ten times and reduce costs by 50%, achieving 100% recycling of heat while reducing carbon dioxide emissions, thus providing the possibility for green and sustainable data center operations.
It is understood that the two-phase liquid cooling technology of ZutaCore almost causes no disturbance to data centers. It unleashes the power of sustainable cooling, increasing processing capabilities by three times, reducing energy consumption by 50%, and halving the space occupied, compared to traditional data center cooling systems. In addition to maximizing efficiency, HyperCool is also scalable, easy to implement, and ensures consistent performance in any climate and location. HyperCool is a complete hardware system, enhanced by an optional Software-Defined Cooling (SDC) platform, capable of cooling any density of any chip without the risk of meltdown.
Currently, products from several well-known server manufacturers, including Dell Technologies, ASUS, Pegatron, and Supermicro, have obtained compatibility certification with the HyperCool system, marking the gradual formation of a server ecosystem supporting HyperCool.
AI Photonic Computing Company CogniFiber
Israeli startup CogniFiber is developing the DeepLight processor, which utilizes multi-core optical fibers to process data traveling through the fibers at the speed of light, aiming to increase the processing speed of AI inference processes by 1000 times while using only about 1% of the energy.
CogniFiber, a startup developing photonic computing technology for AI called DeepLight, recently announced the completion of a $5 million funding round. This round of financing was led by Chartered Group and Eastern Epic Capital. To date, this Israeli startup has raised a total of $14 million, including funds from the Israel Innovation Authority.
The new funds will support the completion of the development of the photonic processor and will help the ongoing development of the photonic supercomputer planned to enter the market in 2027.
CogniFiber was founded in 2018 by Dr. Eyal Cohen, a hardware and algorithm engineer (formerly employed by Mellanox, Saifun, and Oren Semiconductor), and Professor Zeev Zalevsky, a Ph.D. in brain research from the Weizmann Institute of Science, a world-renowned optical researcher, serial entrepreneur, and current dean of the工程学院 at Bar-Ilan University.
(Note: The last sentence seems to be cut off and may require additional context or correction for the name of the engineering school at Bar-Ilan University.)The company currently has 13 employees and is developing a new type of photonic processor called DeepLight, based on extensive research and patented technology. These programmable and trainable processors use multi-core optical fibers to process data transmitted through the fibers at the speed of light. During the inference process, the data flows through the optical fibers, and the light scans all components of the neural network to process data at a speed of billions of inferences per second.
It is understood that in the IRIS classification test conducted by CogniFiber on the Aurora photonic demonstration system, the technology successfully achieved 100 million task executions per second, which is 1000 times the computing power of a single network instance of NVIDIA's 100A processor, while consuming only 180 watts of energy. By 2027, the company is expected to achieve a system with up to 50 exaflops of floating-point operations, with a power consumption of less than 5 kilowatts. With DeepLight technology, a supercomputer the size of a football field can be reduced to a few server racks, reducing costs by tens of millions of dollars, saving tens of megawatts of electricity, and shortening the system construction time by more than 50%.
Photonic supercomputers are designed to work in conjunction with or as an alternative to traditional computers based on silicon chips and circuits, which struggle with AI workloads, consuming a lot of energy for processing and cooling. With the launch of generative AI applications such as ChatGPT, the load challenges have increased significantly.
Dr. Eyal Cohen, CEO and co-founder of CogniFiber, said, "As our initial products enter the global market, the new funding will support the completion of the first-generation processor and our marketing and sales efforts. We believe that the new processor will fulfill the promise of scalable photonic computing, demonstrating how this unique technology can accelerate the development of sustainable AI data centers, smart cities, AI-assisted drug development, adaptive network security, and countless other applications at an exponential rate."
Ana Lipnik-Levy, Senior Vice President of Strategy at CogniFiber, pointed out, "We are deeply aware of the challenges of market education when introducing a new computing platform. However, we have breakthrough technologies with tremendous disruptive potential around us, and we believe that this round of financing will help us attract strategic partners, enter the global market, and open a new, game-changing chapter in the history of artificial intelligence."
Israel's "Key to Success"
For a long time, Israel has maintained a unique style in the semiconductor field - Israeli companies often take a gamble on very cutting-edge technology fields, such as AI, autonomous driving, photonic computing, etc., and then seek a safe exit when the technology matures, which also makes Israel a holy land for venture capital.
Israel's success in the semiconductor field is no accident. So, what are the core elements that enable Israel to continue to maintain its innovative vitality and become the focus of the semiconductor industry?
1) First and foremost, it must be talent. Israel's talent cultivation policy is market-oriented in the field of high technology, which is reflected both in domestic education policies and in immigration policies.
It is reported that the Israeli government has long listed projects such as physics, science, and engineering as key national development directions. If children aged 5 to 15 are considered talented, they will even be included in the talent cultivation system. At the same time, Israel has creatively incorporated military education into the national education system, through the "Tower Plan," selecting outstanding high school students to receive elite training and exposure to cutting-edge technology in the military, so that students have the qualities and abilities of collective thinking, independent thinking, and self-reliance before entering college. Finally, Israel has developed specialized innovative education courses, built a platform for innovative talent cultivation, and integrated entrepreneurship education into the innovation training system.In 2022, the Israel Innovation Authority launched the "HaSadna" program, which brings together enterprises related to semiconductor design and development, artificial intelligence, and so on. It provides professional training for engineers and creates a new collaborative training model suitable for small and medium-sized enterprises. It builds networks and communities around the field of semiconductor technology knowledge, creating a leading talent reserve for the semiconductor industry.
In addition to these local population education measures, Israel is also actively attracting high-end foreign talents. In fact, at the beginning of the establishment of Israel, a large number of highly educated Jewish immigrants formed the foundation of the country's technological development and made significant contributions to the development of Israel's technology industry. This measure is still ongoing today, and measures such as the Israeli B-1 visa program and the high-tech human capital fund program have increased Israel's technical talent reserve in the semiconductor and other technology fields.
Under the influence of multiple measures, the proportion of highly educated talents and engineers in Israel is quite high. The proportion of Israeli researchers in the national population ranks first in the world, and the level of education per capita is also very high. Taking the Technion - Israel Institute of Technology as an example, more than 70% of graduates are working in the high-tech field.
The AI Index report released by Stanford University in 2024 pointed out that Israel ranks first in the world in the concentration of AI talent, and performs very well in fields such as AI, machine learning, and data science. Especially the outstanding culture of innovation and entrepreneurship is highly praised.
2) Israel has a comprehensive policy and capital support system. In terms of policy, the Israeli government provides legal protection and funding for start-up companies and establishes a comprehensive incentive system.
Moreover, the Israeli government has been committed to building a sound and transparent investment regulation system, establishing a flexible investment mechanism, allowing investors to diversify the recovery of investments. In terms of taxation, the Israeli government has also introduced the "Angel Law" to provide tax incentives for private investors in young companies, especially those with R&D capabilities. The corporate tax rate has been reduced from 61% in 1985 to 23% in 2022.
In addition, the operation model of Israeli semiconductor companies has distinct characteristics. Typically, start-ups make breakthroughs in a certain technical field and are then acquired by semiconductor giants. The company obtains funds and then enters the next round of entrepreneurship. This model makes Israeli start-up semiconductor companies pay more attention to the development and breakthrough of technology.
It can be seen that the sound venture capital mechanism and policy support provide support for the operation model of semiconductor start-up companies, becoming a major advantage of Israeli semiconductor start-up companies.
3) Israel has established a vibrant innovation ecosystem that encourages technological entrepreneurship and technological innovation.
This ecosystem covers university research institutions, start-ups, venture capital, and incubators, providing a good entrepreneurial environment and technical support for the semiconductor industry. Israeli engineers have innovative thinking and an open vision. Compared with expanding the market and influence, Israeli local semiconductor companies pay more attention to technology research and development, forming a virtuous cycle of "mergers and acquisitions feeding back".In conclusion, Israel's tremendous success in the semiconductor industry can be attributed to its talent cultivation model, policy and financial support, a well-established innovation ecosystem, and mature, unique technical problem-solving methods. Israel has developed a semiconductor industry innovation ecosystem that is "market demand-oriented, based on government policies and innovative talents, and centered around industry-university-research alliances."
This land is not a mythical place where milk and honey flow everywhere, but in the desert-strewn Middle East, the Israelis have made up for the disadvantages and innate deficiencies brought by the natural environment through strategies such as innovation, capital, and education, quickly joining the ranks of the global semiconductor industry's attention.
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