War is first, and foremost, about human tragedy and the conflict between Israel and Hamas — identified by the U.S. and other nations as a terrorist organization — has already claimed thousands of lives. There is likewise an economic toll. There are now 500 multinationals operating in Israel – mainly research and development centers after buying Israeli start-ups – from Intel to IBM, Apple, Sony, Microsoft, Google, and Facebook.
In 2015, Israel spent 4.3 percent of its gross domestic product (GDP) on civil research and development, the highest ratio in the world. Israel is also home to many electronics and semiconductor companies and facilities.
Intel’s development center in Haifa. Source: Intel’s newsroom
As the country is now under the terrorist attacks of Hamas and has declared a state of war, many workers, and even top-level executives, are currently serving as reservists in the Israel Defense Forces (IDF).
Israel has already said it would call up an unprecedented 300,000 reservists, many of which could come from U.S.-based tech operations. Mobilizing reservists from tech companies, including Intel, affects their regular operations and production.
Israel is home to advanced semiconductor fabs
Tower Semiconductor (formerly National Semiconductor) operates two factories in the northern city of Migdal HaEmek, with an estimated monthly production of over 50,000 wafers. The company, which provides customers with analog and mixed-signal semiconductors, mainly for the automotive and consumer industries, said it was operating as usual.
According to the company’s website, Intel has become the country’s largest privately held employer and exporter and a local electronics and information industry leader. It has three development centers in Haifa, Petah Tikva, and Jerusalem.
Most critically, Intel has factories in the southern city of Kiryat Gat: the Fab 28 plant producing 7nm process chips, and the currently under construction Fab 38, set to open in 2024 and use 5nm process with EUV lithography. Kiryat Gat is just 12 miles from the Gaza border.
Earlier this year, Israel’s Prime Minister Benjamin Netanyahu announced that Intel would invest $25 billion in another factory set to open in 2027. He called it the largest-ever international investment in the country that could employ thousands of people and would add to its chip plants and design centers there.
“Our intention to expand manufacturing capacity in Israel is driven by our commitment to meeting future manufacturing needs . . . and we appreciate the continued support of the Israeli government,” Intel said in a statement.
With factories located relatively close to the conflict area, there are concerns about the safety of these facilities and their employees. Like other companies, Intel is closely monitoring the situation and taking steps to ensure the safety and support of its workforce.
“[We are] closely monitoring the situation in Israel and taking steps to safeguard and support our workers.” an Intel spokesperson said on Monday.
The Gaza blockade is disrupting operations
Thousands of Palestinians cross the border between Gaza and Israel daily to work. They provide essential services in every industry, including transportation, logistics, manufacturing, food, cleaning, and healthcare. Many of them are highly skilled workers.
The blockade of Gaza imposed by the Israeli defense forces effectively closes all the border crossings, making it impossible for any of those staffers to go to their workplaces. This leaves most industries with a shortage of personnel necessary for their operations.
Israel has not yet imposed a blockade on its border with the West Bank, which is also home to Palestinians and Israeli settlers. Border controls, however, will be stricter, and many Palestinians won’t be able to cross the border as usual.
Exports are affected
The disruption in transportation, including flight cancellations and sea route blockades, has also profoundly impacted the supply chain. Many airlines have suspended flights to and from Israel, leaving travelers stranded and affecting the movement of goods. Sea freight operations have faced additional controls by the Israeli Navy, making getting cargo in and out of the country increasingly difficult.
Thousands of travelers are stranded in Tel Aviv’s Ben Gurion airport, and many Israelis cannot return home from many different countries.
Both UPS and FedEx joined a long list of airlines that have sharply reduced international flights into Israel. On Monday, UPS said it had stopped flying to Israel.
Sea freight is compromised. Getting cargo in and out of the country has become increasingly difficult as the Israeli Navy imposes extra controls.
Furthermore, the U.S. sent the USS Gerald R. Ford Carrier Strike Group, including the world’s largest and most advanced aircraft carrier. According to Naval Technology, the ship can carry up to 90 aircraft, including F-35 fighter jets.
Overall, the Israel-Hamas conflict has introduced substantial challenges and uncertainties to the electronics supply chain, affecting multinational companies, production facilities, and the movement of skilled labor and goods. The situation highlights the vulnerability of global supply chains to geopolitical conflicts and underscores the need for adaptability and contingency planning in such turbulent times.
