Israel’s AI Czar Seeks Chip Fab, New Data Centers to Keep Edge

Israel is seeking to build up its chipmaking and artificial intelligence infrastructure, courting large US and Asian semiconductor producers and planning a major expansion of its data center capacity to preserve the country’s regional technological leadership.

The country’s AI czar Erez Askal said he’s lobbying Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Intel Corp. to build a semiconductor manufacturing hub to produce state-of-the-art chips of two nanometers or less. He’s also pitching a data center cluster of 100,000 graphics processing units within five years, on par with the maximum size of one of the European Union’s planned gigafactories.

Askal is a former general who built out the military’s AI infrastructure before being appointed by Prime Minister Benjamin Netanyahu as director of the National Artificial Intelligence Directorate. He’s facing down a protracted war that threatens Israel’s status as an international hub for tech talent, strained electricity grids and deep-pocketed neighbors that are also seeking to become regional AI leaders.

“We’re working very hard to bring them here,” Askal said about the plan to build a semiconductor plant. “I would view it as a very big failure if I don’t get an advanced fab here from one of the companies.”

Spokespeople for TSMC, Samsung and Intel didn’t respond to requests for comment.

Intel began work on a $25 billion fab, partly funded by $3.2 billion in incentives from the Israeli government, in 2023 and halted it the following year as the company faced mounting losses and struggled to compete with the likes of TSMC and Samsung.

Governments around the world have lavished public funds on the chip industry in a push to localize production of components needed for everything from AI to mobile phones. Geopolitical tensions and tit-for-tat export controls between the US and China have raised concerns about supply chain disruptions to the vital industry, which is heavily concentrated in the Asia-Pacific region.

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The envisioned data center cluster comes as the AI race is increasingly dominated by the US and China. The EU recently downsized plans to build AI data centers from an original concept that called for as many as five such facilities of 100,000 GPUs each.

There’s intense competition in the region to build sovereign AI infrastructure, or large GPU clusters that can train and run models locally. The United Arab Emirates is building a project that calls for several hundred thousand GPUs in an Abu Dhabi campus that OpenAI and domestic champion G42 have said they will anchor. Saudi Arabian artificial intelligence company, Humain, partnered with private equity giant Blackstone Inc. to invest $3 billion into local data centers last year.

Security is an issue for these projects, and Gulf data centers have been targeted during the US and Israeli war with Iran.

“During the three years of war, no data centers in Israel were damaged and they operated fully,” Askal said, referring to the regional conflicts that began with the October 2023Hamas attacks. “We see what’s happening with our neighbors. We have a good relationship with them and are trying to help so that it won’t happen there.”

Israel’s strategy is to cultivate the country’s large talent pool in cybersecurity, robotics and semiconductors, much of which originates in the military, and apply it to civilian AI projects, according to Askal.

“Israel has a clear advantage on this, it comes primarily from the defense industries. Our expertise is not making bullets for M-16s; our expertise is taking software or algorithms and embedding it in physical systems,” he said. “We want to use this power of taking software and connecting it to the physical.”

Israel faces constraints building data centers. The country’s Electricity Authority announced on Monday it would not consider new or pending server farm applications this year its backlog for data center requests grew to 27 gigawatts. That’s the equivalent of over 20 million households and far exceeds the country’s overall capacity.

Growing energy demands by power-hungry data centers have prompted some countries in Europe and states in the US to halt projects.

Read More: Data Centers on Track to Suck Up a Fifth of US Power Use by 2035

Strained electricity grids won’t hinder the government’s ambitious plans, according to Askal. The local electric company has the capacity to handle the proposed GPUs, Askal said.

With an annual budget of $1 billion, which Askal wants to boost to $1.5 billion in 2027, the AI directorate does not aim to finance expensive data infrastructure, he said. Instead, it will guarantee capacity as a committed customer, while offering tax incentives and other benefits to private companies that invest.

Israel is also set to pass a law that would enshrine data centers as critical infrastructure and give the government greater powers over their development. The bill, which still needs to pass a final vote, would allow a committee led by Askal to fast-track building permits, as well as set construction and safety standards and ensure air defense systems are positioned to protect the sites.