Apple taking a bite of Israeli tech

It took them a few years, but Apple is finally reported to be joining the long list of companies that have opened research and development centers in Israel. And it couldn’t have come at a better time – coinciding with the purchase by Apple of an Israeli startup, whose flash chips help power the Apple products that have become best-sellers the world over.

 Apple taking a bite of Israeli tech

 

The iPhone maker may be ready to open its first R&D center outside California.

By David Halevi

It took them a few years, but Apple is finally reported to be joining the long list of companies that have opened research and development centers in Israel. And it couldn’t have come at a better time – coinciding with the purchase by Apple of an Israeli startup, whose flash chips help power the Apple products that have become best-sellers the world over.

According to reports, Apple decided months ago to open an R&D center in Israel – its first outside the United States. In the past, Apple has not been a heavy investor in R&D, putting about two percent of annual sales into working on new technologies, which is considered a low figure for tech companies.

 Apple taking a bite of Israeli tech

The iPhone maker may be ready to open its first R&D center outside California.

But Apple needs new, innovative products to stay ahead of its competitors, as Amazon, Microsoft and Google (via Samsung, the dominant maker of Android devices) challenge Apple with new offerings that threaten to break the company’s dominance in the cellphone and tablet market.

Without Steve Jobs’ famous "inspiration", which was said to have been behind many of Apple’s biggest sellers, the company needs to rely more on R&D for its next big breakthroughs. It’s only natural that it would turn to Israel for this, if you look at the competition.

Google has not one, but two development centers in Israel – the only country in the world outside the US with that distinction. Microsoft employs more than 1,000 people at several Israeli R&D centers. Intel has developed some of its most advanced processors, in whole or part, at its Israeli centers. Other tech giants, including Cisco, Motorola, and IBM – among many others – have been taking advantage of the "Israeli mind" for decades.

Apple’s other piece of the Israeli pie

Even before it has officially announced its Israeli R&D center, Apple purchased Israeli startup Anobit for a reported half billion dollars. That figure, if accurate, would put Anobit’s selling price among the highest a tech company here has ever fetched in a buyout – and would be the second most expensive acquisition Apple ever made.

There are several reasons for the high price tag: Anobit makes flash memory chips, the components that are at the heart of smartphones and tablets. Apple as well as Samsung reportedly use Anobit’s chips already. Samsung and Anobit’s other (soon to be) former customers will have to find a new source of flash controllers, since Apple has traditionally tried to keep an exclusive line on the parts it uses for its products.

Besides flash controllers, Anobit holds about 95 patents for flash and other technologies – and the competition between Apple and its competitors for patents, in an attempt to lock out others from getting the best ideas, has never been greater. Just a few months ago, Apple and Microsoft beat out Google for thousands of patents from bankrupt Nortel Networks – spending a whopping $4.5 billion, besting a $3.1 billion bid from Google (a company that traditionally boasted its preference for open-source technology). At $500 million, Anobit’s patents could turn out to be a bargain for Apple!

With Apple, Amazon and Samsung locked in a struggle to maintain or acquire dominance in the device market, a coup like the acquisition of Anobit could give Apple the edge it needs to come out with the next generation of smartphones and devices before its competitors. Anobit has about 200 employees – who could, with the signing of a deal, become the core of Apple’s Israel R&D center.

Apple VP in Israel

Fueling the rumors of the coming R&D center was a recent visit to Israel by Apple Corporate VP for R&D Ed Frank. According to people who worked with him, Frank met quietly with numerous Israeli tech companies, both startups and established. Frank himself has an "Israeli connection," having worked in Broadcom, a major multinational with Israeli roots.

The plan for an Israeli R&D center (an idea that apparently predated the Anobit talks) was on the visit’s itinerary. A report said that Apple had already chosen someone to run the center: Aharon Aharon, currently chairman of the board of Netanya-based Camero, which specializes in radio frequency (RF)-based imaging systems, and whose through-wall imaging systems have become the solution of choice for top military and law enforcement agencies throughout the world. Aharon is a veteran of IBM and in the past ran the Israel design center for Zoran (now CSR). Sources say he will be traveling to Apple HQ in Cupertino to get an in-depth education about how Apple does things.

Regardless of the specifics, however, it’s pretty clear that Apple has finally realized what many other tech companies found out long ago – that Israel is a well of high-tech wisdom waiting to be tapped.

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