Israel and the chip supply chain

Hi, it’s Ian in San Francisco. The war between Israel and Hamas threatens an already-vulnerable chip industry. But first...Three things you [View in browser]( [Bloomberg]( Hi, it’s Ian in San Francisco. The war between Israel and Hamas threatens an already-vulnerable chip industry. But first... Three things you need to know today: • US Space Force [paused use of generative AI]( • EU official said [Israel-Hamas disinformation demands action]( • US tax authorities are [seeking $29 billion from Microsoft]( Israel inside 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. Intel Corp. has been there for almost 50 years and maintains a network of design and production facilities throughout the country. Nvidia Corp., the largest maker of chips used for artificial intelligence systems, has a big presence in Israel. So does Apple Inc., which designs some of its silicon there, an effort run by an [Israeli named Johny Srouji](. [Amazon.com Inc.]( and [Microsoft Corp.]( have important chip-design centers there as well. Israel is one of the few places outside of East Asia where advanced chip production is done. The war between Israel and Hamas, which has left hundreds of people dead in its first week, threatens to further complicate the chip supply chain. Intel set up the first outpost in Haifa, Israel, in 1974, just six years after the company’s founding. It would become an essential research and design center, helping fuel the company’s decadeslong dominance of computer chips. In 2003, when laptops were taking off, Intel introduced a new line of power-efficient processors equipped with Wi-Fi based on designs first proposed by engineers in Haifa. The team gave it the codename Banias, named after a spring near the Golan Heights that Israel took from Syria in their 1967 conflict. The product would later be known as Centrino and Pentium M. The company chose Haifa for its proximity to Technion – Israel Institute of Technology, which has produced many of the region’s leading engineers and scientists, including Srouji, whose work would eventually displace Intel from Apple computers. Some 12,800 people are employed by Intel at five major locations in Israel today, according to the company. Their work includes AI and self-driving cars. Haifa is still responsible for some of what goes into the company’s processors, which retain a dominant share of the PC and server markets. Besides Haifa, the other main site is a chip production plant in Kiryat Gat. Intel has been expanding that project this year. Kiryat Gat is southwest of Jerusalem and a 30 minute-drive from the Gaza border, which bore the brunt of [the violence last weekend](. The port city of Haifa is about a 40-minute ride from the border with Lebanon, where the Israeli Defense Forces and Hezbollah have been [shelling each other]( in recent days. The conflict has already had a terrifying impact. Among the Israelis kidnapped by Hamas fighters is Avinatan Or, an engineer for Nvidia. Videos posted online show Or and his girlfriend Noa Argamani being taken against their will from a music festival that was attacked over the weekend. Nvidia, which cancelled an AI conference scheduled to begin Oct. 15 in Tel Aviv, confirmed the kidnapping. Many companies also have said their employees are part of a mass call-up of army reservists, which will result in workplace disruptions. Intel declined to comment on the status of its Israeli operations or staff there. “We are closely monitoring the situation in Israel and taking steps to safeguard and support our workers,” the company said in a statement. —[Ian King](mailto:ianking@bloomberg.net) The big story Google product managers and designers are skeptical about the usefulness of the Bard AI chatbot. Dozens of [internal Discord messages]( show employee frustration with the chatbot and its potential. One example of its shortcomings we found: Bard (and Bing) [falsely claimed there’s a ceasefire in Israel](. One to watch [Watch the Bloomberg Technology TV interview]( with Yadin Kaufmann, the founder of the Palestinian Internship Program. Get fully charged Electronic Arts has been putting out a new FIFA game every year for the last 30 years. It just released [the first one not called FIFA]( after breaking up with the sport’s global governing body. Alphabet’s DeepMind AI group cut employee costs by 39% as [revenue continued to fall](. A Russian Uber rival called Yango is under investigation over concerns that it was used by President Vladimir Putin’s secret service to [gather data on customers in Europe](. The Swedish mobile network Ericsson was hit with a $3 billion [impairment charge related to its Vonage venture](. More from Bloomberg Live event: The Bloomberg Technology Summit in London will host top technology leaders, business executives, innovators and entrepreneurs on Oct. 24. The event will explore the rapid advance of AI, green technology, the escalation of cyber warfare and more. [Register here](. 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