Israel Courts TSMC, Aims for AI Chip Dominance Amidst Regional Challenges

Israel is making a concerted effort to become a global hub for semiconductor manufacturing and artificial intelligence infrastructure, actively lobbying major chipmakers to establish advanced production centers within the country. Erez Askal, head of Israel's National AI Directorate, is spearheading the initiative, aiming to attract companies like TSMC, Samsung Electronics, and Intel to produce chips using the most advanced 2-nanometer technology or smaller.

Beyond chip manufacturing, Israel has ambitious plans to expand its data center capacity. Askal envisions building a data center cluster equipped with 100,000 graphics processing units (GPUs) within five years, a scale comparable to the largest planned AI gigafactories in Europe. This initiative is part of a broader global race to develop AI capabilities, driven by demand from AI, smartphones, and other advanced industries, and exacerbated by geopolitical tensions and export controls.

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We are trying very hard to get these companies to come to Israel. If we cannot get one of these companies to establish an advanced wafer fab here, I will consider it a very big failure.

However, the endeavor faces significant hurdles. The ongoing regional conflicts could potentially undermine Israel's standing as a global tech talent center. Furthermore, the nation grapples with domestic power supply limitations, as a recent surge in data center applications has led the electricity authority to temporarily halt new applications due to demand exceeding supply. Neighboring countries are also aggressively pursuing AI leadership, intensifying competition.

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Our expertise is not in manufacturing bullets for M16 rifles, but in embedding software or algorithms into physical systems. We want to leverage this capability of combining software with the physical world.

Askal, a former Israeli military official with experience in AI infrastructure, expressed the gravity of the situation, stating that failing to attract a major chipmaker would be a significant setback. While TSMC, Samsung, and Intel have not yet commented, Israel aims to leverage its strengths in cybersecurity, robotics, and semiconductor expertise, particularly its ability to integrate software and algorithms into physical systems, a capability honed in its defense industry.

Despite power constraints, Askal remains optimistic, asserting that the national AI directorate's budget will increase, and the government plans to incentivize private investment through procurement commitments and tax breaks rather than direct funding for construction. A proposed bill aims to designate data centers as critical infrastructure, granting the government greater control over their development and ensuring security measures, including air defense systems.

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During the wars of the past three years, no data center in Israel was damaged, and all facilities continued to operate normally.