Opinion

Mobileye-Intel: The Good, the Bad and the Ugly

The $15.3 billion sale proves that Israeli technology is unstoppable, but it also shows how little Israelis really profit from it. Meanwhile, the BDS movement should just throw in the towel.

A Mobileye camera system that monitors speed limits and warns about potential collisions, October 14, 2015.
A Mobileye camera system that monitors speed limits and warns about potential collisions, October 14, 2015. AP / Carlos Osorio

Of course, the Mobileye deal should make every Israeli proud. It’s like one of our own coming home with an Olympic gold or an Oscar for best foreign film. And even though Mobileye’s enormous success is the work of a few hundred people, just as an Olympic Gold or an Oscar is the work of one person, we can’t help but bask in the glory. And in the case of Mobileye, we can take some deserved satisfaction knowing that the government wants to use its $1 billion slice to pay for tax cuts for the rest of us.

But there’s a much bigger good to all this than national morale and a few extra shekels in our paychecks. Mobileye is Exhibit No. 1 for the case that Israel’s technology prowess runs deep and that its impact stretches far beyond the realm of the next cool gadget.

Not a one-trick pony

There was a time when Israel’s early successes in high-tech were discounted as one-time wonders. Back then in the ‘90s the tech sector was just taking off on the back of the internet revolution, telecommunications deregulation and the Bug-2000 hysteria, all of which provided unprecedented opportunities for Israel’s proven experience in information technology.

When those revolutions ran their course, it would all be over, many said.

It hasn’t worked that way at all. All the world is going digital as artificial intelligence and big data invade one industry and one market after another and fundamentally change their dynamics. Mobileye is the latest example. The automobile industry − an old-economy industry if there ever was one − is being upended by the rapid move to driverless cars.

Never mind pistons, learn coding

Israel never had an automobile industry to speak of, but in the brave new world of autonomous driving, you don’t need expertise on what goes on under the hood, you need to know how to work with algorithms.

That change involves more than cars. Everything from retailing and sports to insurance, banking, medicine and law is undergoing the same kind of revolution, and in almost every area there’s a handful of Israeli startups − some of which will grow up to be the next Mobileye.

That’s the good, but there’s the bad, too. Ten years from now, when you’re tooling around in your car (or actually, being tooled around by your car), it will be Intel inside – not Mobileye. The $15.3 billion price tag Intel put on Mobileye is a lot of money, but Intel wouldn’t be paying it without being confident its investment will earn it a lot more over the years.

Intel will be the one that owns the patents and makes and sells the chips − earning profits while employing many thousands and spreading those benefits throughout the U.S. economy.

Coincidentally, the day the Intel-Mobileye deal was announced, Israel's Science, Technology and Space Ministry released a poll of which Israeli inventions over the last 70 years Israelis think were the most important. In order, they were the Iron Dome anti-missile system, the Waze navigation app, DiskonKey (the USB flash drive), the multiple sclerosis drug Copaxone, drip irrigation and microprocessors developed by Intel’s Israeli R&D team.

Now look carefully at that list. Of those, two (DiskonKey, Waze) were bought by U.S. companies, and a third (Intel chips) was developed in Israel for a U.S. company. Only Iron Dome and Copaxone are actually produced in Israel.

And therein lies a critical difference: Teva, the company that makes Copaxone, employs 6,860 people in Israel (and 57,000 worldwide); Mobileye, the day it agreed to be bought by Intel, employed 660. Mobileye will keep hiring in Israel even after it’s bought, but most of the jobs and all the profits created by Intel for its autonomous-car business will be elsewhere.

If the Mobileye deal has its good and bad elements for Israel, for the boycott, divestment and sanctions movement it’s nothing short of ugly. Whatever progress BDS has made on college campuses and in cooperative grocery stores was wiped out by a single giant deal. And it’s not just the billions of dollars involved but the fact that BDSers now face the unpleasant prospect of knowing that not just their laptops and smartphones are filled with Israeli technology, but in short order so will their cars.

This is the movement’s problem: Israel technology is buried deep inside devices, or hosted on a network, or used by your provider. You might stand a chance at convincing consumers to boycott SodaStream, but they’re not going to boycott Amazon because it uses cloud computing technology from Israel, or Google because it bought Waze, or not buy an iPhone because its camera was developed by Israeli engineers. It’s worse than hopeless.

Strangely enough, even as the Mobileye-Intel deal tells a totally different story, the government is obsessed by the supposedly growing threat from BDS. That seems more a function of the right’s insatiable lust for uncovering anti-Semitism and Israel hatred wherever it can find it. For the real facts, follow the money.