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Business Trends

Israel blossoms into development hub for high-tech cars

Hyundai and Porsche put down R&D roots in 'Silicon Wadi'

An employee demonstrates Mobileye's driver assistance technology.

CAIRO -- A unique business landscape cultivated by the government is fast transforming Israel into a Silicon Valley for auto development, drawing the world's leading names in cars.

Israeli advances in automotive technology have caught the attention of multinationals like American chipmaker Intel, which bought driver assistance technology developer Mobileye for more than $15 billion last year.

An area centered on Tel Aviv has earned the nickname "Silicon Wadi" for its concentration of tech companies. ("Wadi" is an Arabic word for a dry streambed.) The Middle Eastern country was home to over 7,800 high-tech startups in 2016, up more than 80% from 2012.

Hyundai Motor plans to establish a research and development center in Israel as early as this year. The South Korean automaker will partner with local startups to speed development of next-generation vehicles. Hyundai, together with the Korea Advanced Institute of Science and Technology, has also entered into a joint research partnership with the prestigious Technion-Israel Institute of Technology.

Volkswagen and BMW are said to be considering R&D outposts in Israel. Porsche said in 2017 that it was establishing an "innovation office" there. Israel has more startups per capita than any other country, said Lutz Meschke, deputy chairman of the German sports car maker's executive board, in a statement.

"This talent and technological know-how coupled with the great expertise offered by our employees creates the ideal breeding ground for future business models," Meschke added.

Israeli soldiers take part in a cybersecurity hackathon at the iNT Institute of Technology and Innovation in Beersheba.   © Reuters

Japanese car companies also see promise in Israel. The Renault-Nissan Motor alliance has moved in with a goal of partnering with startups and streamlining R&D. Honda Motor has offered funding as well as a platform for collaboration. A Japanese automaker said it attended a Tel Aviv auto tech expo last November for the express purpose of finding promising local companies.

"It's pretty difficult to gain entry into the Silicon Valley community," a source at a Japanese corporation said. "Access is easy in Israel because they have a welcoming attitude."

Israel's strength lies in the diversity of its engineering. Every technology key to automated driving can be found in the country, said Gil Golan, director of General Motors' R&D center there. The American automaker's 300-person hub is busy developing technology for connected cars and sensors.

A tug of war has developed around top Israeli startups. Volkswagen has invested $300 million in ride-hailing company Gett, and Ford Motor has bought SAIPS, which develops artificial intelligence for image processing. The Toyota Motor-backed Mirai Creation Fund pumped $5 million into communications chip developer Autotalks last year.

Starting in the 1990s, the Israeli government established venture capital funds that provide startups with funding and advice from the embryonic stage. This ecosystem is supplemented by mandatory military service -- for men and women -- with an emphasis on computer training. The country has also been proved adept at transferring military technology to the private sector.

The result is a talent pool of experts in AI, cybersecurity and other technology fields. Many decide to start their own businesses rather than compete for a job at one of a limited pool of big corporations in Israel.

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