Intel Buys AI Chip Maker Habana Labs in Biggest Israeli Tech Deal of the Year

In what is certain to be the biggest high-tech exit for Israel this year, Intel Corporation said on Monday that it had acquired Israeli startup Habana Labs, a maker and developer of artificial intelligence chips, for $2 billion in cash.

The acquisition will be the U.S. semiconductor giant’s 13th in Israel and its second largest ever in the country, after it bought auto-tech company Mobileye in 2017 for $15.3 billion, expanding a local empire that makes Intel Israel’s biggest tech employer and export.

It also marks a strategic acquisition for Intel, which is seeking to become a major player in the emerging AI chip segment. The leader in chips for personal computers, Intel missed the market's transition to mobile devices and chips. It is determined not to repeat the mistake in a market it estimates could be worth $25 billion by 2024.

Habana is widely regarded as one of the startup leaders in developing artificial intelligence chips and thus had been seen as a likely acquisition target by Intel. “Intel doesn’t want to miss the AI market the way it missed the mobile market,” an industry source who asked not to be further identified told TheMarker earlier this month, amid reports that Intel was eyeing the company.

Among the scores of startups developing AI hardware, Habana Labs it is one of the first to deliver working products. It launched its Goya chip for inference processing in September 2018, claiming roughly three-fold the performance advantage over industry leader NVIDIA. Last June, Habana Labs unveiled its Gaudi training chip.

Intel acquired the U.S. company Nervana in 2016, which recently launched its first AI processor. In addition, Intel Capital has invested in AI startups, including Israel’s NeuroBlade, which is working on an AI processor as well. But Habana Labs will give Intel an important leg up. While NVIDIA is the industry leader, all the biggest names in global tech have entered the segment as well, including Google, Amazon, Facebook and Microsoft.

“Habana turbo-charges our AI offerings for the data center with a high-performance training processor family and a standards-based programming environment to address evolving AI workloads,” Navin Shenoy, Intel’s executive vice president and general manager of the Data Platforms Group, said in a statement.

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Habana Labs was founded in 2016 by serial entrepreneur Avigdor Willenz. He had previously founded and sold Galileo Technologies in 2001 to Marvell for $2.7 billion and sold Annapurna Labs to Amazon for $370 million in 2015. CEO David Dahan and Ran Halutz, vice president for research and development, also co-founded the company.

Habana Labs’ founders and employees, who together own about 60% of its shares, stand to profit handsomely from the deal. The rest include U.S. venture capital funds like Bessemer and WRV and Intel’s venture arm, Intel Capital. All told, Habana Labs had raised $120 million to date.

Intel said that Habana and its approximately 150 employees will remain in Israel as an independent business unit inside the company, and will continue to be led by its current management team, reporting to Intel’s Data Platforms Group. Willenz has agreed to serve as a senior adviser to the business unit as well as to Intel, the company added.