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Jon Medved
Founder and CEO of OurCrowd

A strong blue and white link in the automotive supply chain

(Illustration: Elisheva Eizenbach / mostdesigned.com)
(Illustration: Elisheva Eizenbach / mostdesigned.com)

Niamh McBurney, Associate Director at Control Risks in Dubai, advises businesses and organizations operating in volatile areas. So it was no surprise that her phone started ringing after Hamas terrorists stormed into Israel from Gaza on Oct. 7, slaughtering more than 1,200 people and abducting more than 250.

But, as she told the BBC, while she expected calls from clients with supply chains in the region, the sectors worried about the impact included one she wasn’t expecting.

“One in particular that people may not be aware of is the automobile sector,” McBurney told the BBC’s Today programme. “Israel is a major supplier of parts and technology relating to cars, trucks and other things, so we’ve had a lot of engagement from clients in that sector.”

Israel has come a long way since the Susita (“Little Horse”), the country’s ill-fated 1960s attempt to create a domestic automobile industry. That vehicle became famous not for speed or performance, but for being eaten by camels who were rumored to graze on the fiberglass bodywork if it was left parked overnight in the desert.

Israel’s place in the modern automotive supply chain was cemented by Mobileye (NASDAQ: MBLY), the country’s most successful startup company to date as measured by market cap. It first went public in 2014 valued at $5.3 billion, was acquired by Intel for $15.3 billion in 2017, was spun off again through an IPO in 2022 valued at $16.7 billion, and now has a market cap above $22 billion. Mobileye combines advanced vision technology and software that enables cars to avoid collisions and ultimately become completely autonomous.

There is a long list of Israeli startups developing technology for the all-electric car future, but even traditional automobiles are now dependent on Israeli innovation.

Data centers on wheels

Today’s cars, even those with combustion engines, are data centers on wheels, containing 1,000 to 3,000 semiconductor chips.

Fueled in large part by Intel, Texas Instruments, Qualcomm and Tower Semiconductor, Israel’s semiconductor industry has quietly moved up the global rankings. Even a new powerhouse like NVIDIA has about 13 percent of its worldwide workforce based in Israel, as well Michael Kagan, its global CTO.

“The war between Israel and Hamas threatens an already-vulnerable chip industry,” Bloomberg reported in October. “Israel is a small country with an outsized influence on the global chip industry. It’s a major source of engineering talent, a hub for international chipmakers and fertile ground for semiconductor startups the big companies often want to acquire.”

“Israel is one of the few places outside of East Asia where advanced chip production is done,” Bloomberg says.

“Israel is home to companies spanning the semiconductor ecosystem and plays a crucial role in the global chip market,” confirms Anirudh Munder, assistant manager of industrials at The Smart Cube, a research company. “Major chip makers such as Intel and NVIDIA have significant operations in Israel. Tower Semiconductor produces 50,000 wafers per month for the automotive industry and consumer electronics industry.”

While Israel’s chip output is dwarfed by Taiwan, which produces 60 percent of the world’s semiconductors and 90 percent of advanced semiconductors, “further escalations between Israel and Iran may result in price increases for chips used in the automotive industry,” Munder warns.

Chain holds

But Israel’s impact goes far beyond chips. Israel is an important supplier of specialist goods and services to western companies in chemicals, pharmaceuticals, energy and technology, Jim Wetekamp, CEO of Riskonnect, an integrated risk management solutions provider, told Commercial Risk.

Faced with a critical test of its resilience, Israel held its place in the global supply chain and, at the crucial moment, literally shot the threat out of the sky.

Despite gloomy predictions immediately following the Hamas massacre on Oct. 7, Israel’s tech sector held firm. There was negligible impact on the delivery of technology and key products. The slogan “Israeli tech delivers no matter what,” coined by Israeli tech leaders to reassure customers abroad, proved to be an iron-clad guarantee. From Oct. 7 to March 31, Startup Nation Central counted $3.1 billion in venture funding raised for Israeli companies in more than 220 deals. M&As added up to $3.7 billion.

“We are resilient and we can continue working tomorrow morning and deliver on our commitment and excelling and innovating,” Rinat Zilberstein, VP of R&D at AT&T, and GM of AT&T’s Israel R&D Center, told CTech. “I think that confidence was very good for our leadership in the US, understanding that we are resilient and Israeli tech will deliver no matter what.”

With grim irony, the unprecedented attack by Iran in April battle tested Israel’s advanced technology in real time – and it passed with flying colors. Iran’s decision to launch the largest drone attack in history, accompanied by huge waves of ballistic and cruise missiles, proved beyond any doubt the efficacy of Israel’s multi-layered missile defense system. Assisted by a coalition of allies including the US, UK, UAE, France and Jordan, the invading projectiles were almost all intercepted, preventing the mass murder of thousands and the eruption of a major regional war.

Thought impossible

Underlying this extraordinary display of active defense was Israel’s Iron Dome anti-missile system, powered by software developed by OurCrowd portfolio company mPrest.

“Israeli innovation accomplished what was thought impossible,” says Yoni Frenkel, editor of the Israel Startup Review. “What we experienced was an unprecedented case of tech innovation. The vibrant Israeli tech community, the IAF’s courageous pilots, and global allies all worked together, showing what technology and collaboration can accomplish. Israeli entrepreneurs are amazing at building world-class companies which solve big problems, but what we saw this weekend was the Startup Nation at its finest.”

One of the immediate effects of Iran’s attack was to boost Israel’s security and defense sector. On the day following the barrage, when the stock market might have been expected to reflect national jitters, shares in Elbit Systems (NSDQ: ESLT) rose nearly 4 percent, Aerodrome Group (TASE: ARDM), which collects and processing information using drones, climbed 6 percent, and NextVision Stabilized Systems (TASE: NXSN), which develops stabilized cameras for ground and aerial vehicles, gained 5 percent.

“There was very significant proof yesterday of the technological capabilities of the State of Israel,” Yair Shani, CEO of the Sigma Investment House, told Globes. “There is no doubt that there will be very large demand for defense products from Israel.”

Meanwhile, literally under the radar, Iran and its proxies have also been bombarding Israel’s cyber networks with waves of cyberattacks ranging from phishing and ransom attacks to the cold-blooded dispatch by an Iranian agent of a funeral wreath to the family of one Israel’s 132 hostages still held by Hamas and other groups in Gaza.

The absence of any major disruption to Israel’s networks and critical infrastructure despite the shocking Iran-backed barrage testifies to Israel’s expertise in cybersecurity, demonstrating again why some 40 cents of every venture dollar invested in cybersecurity worldwide is invested in Israeli technology.

Leadership

Small wonder that in 2023, as global investment in startups fell, Israeli cybersecurity exits grew by 65% to $7.1 billion. In the first quarter of 2024, Israeli cyber exits notched up another $985 million, despite the ongoing war with Hamas and Hezbollah, according to data from IVC.

I expect Israel to maintain its leadership in the cybersecurity sector, where startups are created with impressive frequency based on innovation first honed by the elite cyber units of the Israel Defense Forces. As soldiers rotate back into civilian life after their mandatory service, they constantly refresh the pool of ideas and talent that is the bedrock of Israel’s startup nation.

Even more encouraging is the fact that these same skills and talents are creating essential technology far beyond the specific and growing demand for cybersecurity. This diversification of output helps broaden the base of Israel’s innovation economy – one the many reasons why the country’s key economic indicators are largely holding steady despite the disruptions wrought by more than six months of war.

I am seeing up close at OurCrowd the traction that automotive startups are gaining with some of the world’s largest automobile companies.

  • Argus, one of OurCrowd’s earliest investments, was acquired by Continental for $430 million in 2017.
  • Autobrains, a Mobileye competitor that is developing ADAS technology at a lower price and with less energy consumption than similar technology.
  • Foretellix, which tests the behavior of driverless cars, recently raised $85 million from investors including NVIDIA, Isuzu, Temasek, and Toyota’s growth fund Woven Capital.
  • Addionics, which develops next-generation battery technologies, in February announced a planned $400 million investment to manufacture EV batteries in the US.

Resilience

The prime examples of the resilience of Israeli tech startups over the past six months is that even companies located in the war zone created by Hamas’ rampage on Oct. 7 have continued to thrive. Carrar and BionicHive are both located in Sderot, just a few miles from Gaza. The town was overrun by Hamas terrorists who gunned down at least 50 Israelis in the town’s streets.

Carrar, whose thermal management systems can triple the life of EV batteries and prevent them from catching fire, raised $5.3 million in April – only six months after it had to evacuate its headquarters after it was targeted by Hamas rocket-propelled grenades. BionicHive, which develops automated warehouse technology hailed by Elon Musk as “the robot future,” is pushing ahead with the delivery of its systems with Amazon as an enthusiastic investor through the Amazon Industrial Innovation Fund. BionicHive regularly delivers its systems to new customers in the US and is actively hiring for several new positions at it expands.

But the growth of electric vehicles brings new challenges. Battery charging stations could become a key gateway for cyber attacks on EVs, a vulnerability addressed by C2A Security, which specializes in cybersecurity for the automotive sector.

Hailo, an impressive unicorn which has developed the world’s most powerful low-energy

chip for AI computing on the edge and just raised another $120 million, is working with several major auto manufacturers and is deepening its penetration into the Japanese automotive market with the appointment of NEXTY Electronics from the Toyota Tsusho Group as a new distributor.

Finally, CorrActions, nurtured in OurCrowd’s Labs/02 Incubator in Jerusalem, uses a vehicle’s existing sensor data to evaluate a driver’s cognitive state due to drowsiness, alcohol, fatigue and other issues. Last December, the company raised $7.25 million in a round led by Volvo Cars Tech Fund.

Israeli technology has become firmly embedded in broad swaths of the global supply chain for AI, automotive and other crucial areas of the modern economy because it’s often the finest available – and always delivers – no matter what.

About the Author
Jonathan Medved is the founder and CEO of OurCrowd, based in Jerusalem, a global investment platform where accredited investors can participate in private market startups and alternative assets, . Nothing contained in and accompanying this communication shall be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation to purchase any security by OurCrowd, its portfolio companies or any third party.
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