Australia/Israel & Jewish Affairs Council

A Very Big Deal

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Amotz Asa-El

 

The Israeli economy may have seen one bigger deal in its 69-year history, but Intel Corporation's takeover last month of Jerusalem-based Mobileye will go down as a landmark whose technological, economic and international significance transcends its financial size.

Admittedly, that size is impressive by any yardstick. Though much smaller than Israeli pharmaceutical giant Teva's purchase last year of an Irish competitor for US$40 billion, this US$15.3 billion buyout is 50% higher than all of last year's foreign takeovers in Israel put together, and the most anyone has ever paid for an Israeli firm.

At the heart of the deal lies a new niche for Israeli innovation: vehicle technology.

It began with navigation assistance, when a software firm in Ra'anana, north of Tel Aviv, developed software that locates and leads drivers to their destinations while deploying other drivers' real-time reports. That firm of 100 Israelis, Waze, was bought in 2013 by Google for nearly US$1 billion.

That invention brought an Israeli technology into millions of cars worldwide, initially as an auxiliary and now as a built-in accessory. Then came Mobileye's initial driving assistance tool which, with the help of sensors akin to a bat's, warns drivers of approaching vehicles, pedestrians, obstacles, railings and lane margins, thus improving traffic safety.

Yet by the time Intel bought it, this part of Mobileye's business had already been reproduced by assorted competitors, and was no longer a reason to purchase it for a fortune - even though Mobileye still commands 70% of this product's global market.

What made Intel part with a sum that is equal to Israel's entire defence budget is Mobileye's centrality in the global race for the development of the driverless car.

In this competition, which also involves Tesla, Google and Apple, Mobileye had already teamed up with German carmaker BMW. Then Intel decided this is where its own future lies, after the Santa Clara-based technology powerhouse found itself elbowed out of the smartphone revolution by Samsung and Apple.

The autonomous car, as the industry calls it, has already performed test-drives in real traffic in California and also on Jerusalem's Menachem Begin Expressway, where it proceeded smoothly behind one camera and one sensor attached to its windshield.

In upcoming months the next prototype is planned to return to the scene surrounded by eight such sets of artificial eyes and ears - equipped to survey its 360-degree surroundings better than any human ever will.

Founded by Hebrew University computer science professor Amnon Shaashua and industrial engineer Ziv Aviram, Mobileye is no longer a mere addition to someone else's product. Rather, it is at the forefront of what may well be industrial history's next big thing, a turning point on the scale of the inventions of the telegraph, the lightbulb or the computer.

The autonomous car's most far-reaching impact is expected in the realm of car accidents.

Due to its refusal to speed, inability to collide, and full obedience to traffic lights - or whatever it is that will replace them - the number of car accidents will plunge once entire cities shift to autonomous driving, a transition that experts like Aviram and Shaashua say will happen sooner than most people assume.

The trend will intensify when the car's self-driving abilities and obstacle detection technologies are coupled with navigational dialogue instrumentation that will allow potentially colliding vehicles to "converse" while still at a distance, and thus avoid each other like repulsive magnets.

As it sharply reduces the current global "harvest" of 1.5 million annual fatalities and 50 million injuries to drivers and passengers in traffic accidents, the financial, industrial and social implications will be profound.

Car insurance costs will likely plunge by more than 50%. Millions of garages will shut down. Families' sudden ability to allow their one car to drive itself between their workplaces and schools will make their second car unnecessary. The subsequent rise of self-driven cabs may make many shed their first car as well. The result will be a massive cutback in car production and a plunge in car prices.

Environmentally, this will sharply cut urban pollution levels. Industrially, at the same time, the autonomous car will challenge economies heavily reliant on car production, from Brazil to Turkey through Poland.

The autonomous car, in short, is likely to have its own page in economic history, and Israeli technology will be at its forefront. It is a position in which Israeli inventors have never been, despite their many accomplishments until today.

 

Israeli inventions have frequently stemmed from specifically Israeli circumstances. Drip irrigation, for instance, which enables farmers to maximise yields while minimising water usage, reflected Israel's unique combination of arid climate and great agricultural aspirations.

Similarly, Israel's military predicaments made it seek cheap ways to produce efficient arms, giving rise to a plethora of weapons systems, from the Uzi sub-machinegun in the 1950s to the Iron Dome missile interception system this decade. Such inventions were technological and commercial success stories, but they did not constitute economic turning points, even for Israel, let alone mankind.

The same went for Israel's pharmaceutical innovation, where a medicine like Copaxone, which treats multiple sclerosis, is life-changing to patients with this disease, but is not a medical landmark on the scale of, say, the invention of penicillin.

By the same token, famous Israeli technological inventions, from the PillCam which painlessly films intestines from within, to the Takadu system that allows real time detection and control of leaks and breakups in large-scale water management systems - have all been pivotal in their specific industries, but not for the entire world.

The autonomous car is an entirely different league, as it will potentially affect every human economy, society, and individual.

Israeli leaders quickly realised that more is at stake in this deal than its sheer magnitude, though this is of course good news in its own right. In a budget fed by some US$75 billion in internal revenues, the deal's roughly US$1 billion worth of expected tax payments was large enough for Prime Minister Binyamin Netanyahu to promise deeper tax cuts in its wake.

"This is not about the money," said Prof. Shaashua, "we were multimillionaires a week ago and will remain such. We want to change the world."

His colleague Aviram concurred. "We had a vision, to solve the problem of traffic accidents. It's a global epidemic."

 

The road to victory for this pair of Sabras [native-born Israelis] is still long, but one victor can already be declared: Jerusalem.

Tucked in Jerusalem's Har-Hotzvim section, where scores of hi-tech firms cluster near the exit to Tel Aviv, Mobileye is but one detail in an unsung aspect of the city that is famous for its sanctity, splendour and strife - much more than for its technology invention or generation of profits.

Yet the reality is that hi-tech start-ups in the Israeli capital have trebled this decade from 200 to 600, all of which will now derive inspiration, and in many cases also job offers, from Intel's transfer of its autonomous-car development centre from California to Jerusalem.

Intel's move is expected to create 4,000 new engineering jobs in Jerusalem, while Mobileye will expand its 22,000-sq.-metre campus to 50,000 sq.-metres.

In Jerusalem to announce the deal, Intel CEO Brian Krzanich said, "This collaboration will be centred here in Jerusalem, led by Amnon [Shashua]. He will lead Intel's overall autonomous vehicle efforts, across the whole company, not just here in Israel; we will be folding in operations in the US underneath the operations here."

The 56-year-old chemical engineer who has worked for Intel since he was 22, then added, "We think of ourselves as an Israeli company as much as a US company." Though taken in Israel as a supreme and once unthinkable compliment, it wasn't intended as such - it was strictly business.

 

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