This is primarily related to the operating model adopted by Israeli companies.

Israel is a country that highly embraces entrepreneurship. It has over 7,000 innovative technology companies, making it the most concentrated region for startup companies globally. This is equivalent to approximately 1 entrepreneur per 1,400 people, a per capita entrepreneurship rate that is unmatched.

In the semiconductor industry, in 2020, Israel ranked second globally in terms of the number of semiconductor startups, second only to the United States.

Due to a strong inclination towards innovation and "new adventures," after the semiconductor elites in Israel establish their own semiconductor companies, they are not aiming to become or surpass giants within the local market, but rather seek acquisition opportunities.

Therefore, the usual path for most Israeli semiconductor companies is as follows: establish a startup company - achieve a breakthrough in a particular field - be acquired by a giant - start the next round of entrepreneurship.

Partial list of significant acquisitions in Israel's semiconductor industry

Also because of this, the majority of Israel's hundreds of startup semiconductor companies focus more on refining their technology rather than on business and operations.

Furthermore, let's take a closer look at Israel's semiconductor market. Storage holds the largest share in the Israeli semiconductor market, followed by power management ICs, logic chips, OSD (On Screen Display), and analog chips.

Based on market segmentation, the largest market for Israeli semiconductors is data processing, followed by communications, industrial, consumer electronics, and autonomous driving.

After finding its own path, the Israeli semiconductor industry has experienced steady growth every year. It is projected that in 2023, the revenue of the Israeli semiconductor market could reach $114 million. It is worth mentioning that China is the largest consumer market for Israeli semiconductors.

Israel, known for its business acumen, has adeptly navigated the unstable geopolitical landscape by balancing between China and the United States to prosper.

During the height of the U.S.-China trade tensions in 2018, Israeli semiconductor exports to China surged by a remarkable 80%. Semiconductors quickly became a significant part of the economic relationship between China and Israel. The latest data shows that in 2021, China remained the largest export destination for Israeli chips.

What about the concerns from the United States regarding Israel's chip business with China? Well, the answer lies in the "periphery" of the Wassenaar Arrangement—not fully complying but not completely opposing either. Israel may test the boundaries within certain regulations, but it does not directly confront the United States.

By not offending either side, this business thrives.

To be continued...