Intel, however, had decided to build its next plant in Arizona; the Jerusalem fab wasn’t being asked to modernize. If Intel Israel wanted to stay competitive, it would have to find a way to completely retool the fab without stopping production — a scenario that seemed utterly impossible.
Frohman urged the fab’s engineering team to brainstorm. “I don’t care how crazy the ideas are; just come up with something,” he told them. Three weeks later, they returned with an idea. By raising the fab’s roof and building a new air-conditioning system above its existing one, they suggested, they could retrofit the entire plant by slowly breaking through the ceiling — without ever stopping production. The $10 million projected cost was far less than the $1 billion a new fab would require, and Intel headquarters gave its blessing to the project. The Jerusalem fab would be able to compete with Intel’s other fabs — including the one in Arizona.
Ultimately, Frohman’s risk paid off. “The project had a galvanizing effect, not just on the facilities team but on the entire fab workforce,” Frohman wrote in Leadership the Hard Way. “Because everyone was so worried that production might suffer, they went out of their way to maintain and even improve on our performance. The paradoxical result: Our output was even better during and after the project than before.”
As a result, Intel Israel won a significant part of Intel’s global production for its 486 microprocessor. And in 1995, the company decided to build an additional fab in Israel, in the southern town of Qiryat Gat, followed by another at the same site in 2008. At $3.5 billion, the latter project was the single largest direct investment of foreign capital in Israel’s history.
A State of Innovation
Israel’s geopolitical situation remains shaky, but that also means that it continues to invest in technology to retain its economic and military advantages. In January, two rockets fired from the Hamas-controlled Gaza Strip — a mere 15 miles from Qiryat Gat — exploded near Intel’s facilities. As an Israeli innovator and management theorist, Frohman is aware that the future of Intel Israel may depend, in part, on events beyond its control. And although he says that innovation and creative teamwork are inherent strengths of Israeli society, he believes that Israel’s high-tech sector is not operating at its full potential.
“Who says we’re doing well compared to what we could be doing if there was peace?” he asks. But doesn’t economic stability lay a foundation for peace? “High tech may be Israel’s locomotive of progress, but it’s missing several wheels,” he insists, citing what he sees as the country’s outdated education system, failure to embrace its full manufacturing capabilities, and growing gap between its haves and have-nots. Underlying all this, he argues, is Israel’s lack of a long-term social vision, a result of its focus on security.
Ironically, the growing gap between Israel’s rich and poor has been spurred largely by the very thing that Frohman worked so hard to develop: the high-tech sector. In Qiryat Gat, where Intel Israel employs more than 2,000 workers, this dichotomy is keenly felt. Despite the activity in Intel’s industrial park, the town’s unemployment rate hovers around 10 percent. Its residents, many of whom are immigrants from Russia and Ethiopia, simply lack the skills necessary to work in high tech.
In the middle of the afternoon on an autumn day in Qiryat Gat, glum-looking men play cards on a sidewalk bench. The town center, just a few minutes from one of the world’s most advanced manufacturing facilities, is empty save for a stray dog.