Israeli AI-chip co Element Labs aims to rival tech giants

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Billionaire Avigdor Willenz's latest startup has adopted a strategy that has put it on a path to rival chip giants like Broadcom, Marvell and indirectly Nvidia.

The new AI chip startup founded by Israeli serial entrepreneur and billionaire Avigdor Willenz is generating a storm in the tech industry with plans to compete with international chip giants and the way that employees are being hired. Sources familiar with the matter have told "Globes" that in recent months the new startup called Element Labs has adopted a strategy that has put it on a path to rival companies like Broadcom, Marvell, and indirectly Nvidia.

In the past month alone, for example, Broadcom's share price has risen 28% due to reports that it is developing graphic processors for Apple and OpenAI and a graphic accelerator for Google (TPU). Marvell's share price jumped nearly 9% over the past month due to new partnerships to develop Amazon’s AI processors and an AI accelerator for Microsoft.

Element Labs is now setting up a development operation that will allow it to compete with Marvell and Broadcom and offer companies like Amazon, OpenAI and Microsoft an end-to-end hardware system that includes communication chips, core processors, a graphics processor and a software layer that manages all of these components. For companies without hardware divisions, like Meta and OpenAI, Element Labs could be especially effective. It would also allow those tech giants to compete with Nvidia, which is not only interested in selling them expensive end-to-end systems, but in the future may even compete with them directly.

To cut reliance on Nvidia

More and more big tech companies are looking for a way to develop chips and communication systems that will allow them to overcome the growing demand for AI services and, in doing so, are becoming the world's largest chip consumers, which has been a huge boost for Nvidia. In order to rely as little as possible on Nvidia, which offers graphics processors, communication processors, communication switches and servers at high prices, or on Intel, which has failed to launch relevant chips onto the market, they are seeking to develop some of these components in-house.

To this end, many of the tech companies have set up in-house development departments, many of which are managed in Israel, based, among other things, on managers who have come from Intel and Marvell. For example, Google chose former Intel VP development Uri Frank to manage its processor development and former Marvell Israel CEO Guy Azrad as his deputy. Google is developing core processors and AI accelerators in collaboration with Broadcom, as well as core processors in collaboration with Marvell.

Apple has also established chip development activity under the management of Israeli Johny Srouji, but this focuses mainly on developing hardware for edge devices. For the development of AI chips for servers, the company now uses Broadcom. Amazon has also set up an internal development activity through the acquisition of Annapurna Labs, which Willenz himself founded with entrepreneurs Bilic Hrvoje and Nafea Bshara.

Annapurna Labs is currently developing communications chips for Amazon, a core processor for the cloud, and graphics processors for training and running models, and the company reports that total revenue from Annapurna products is estimated at about $35 million per year. At the same time, Amazon also uses Marvell to develop the core of its model training and running processors.

A far-reaching vision for an Israeli company

The new move by Willenz and his partners at Element Labs involves a far-reaching vision for an Israeli company, which will require an investment of hundreds of millions of dollars in the long term. As far as is known, the company has so far raised several tens of millions of dollars from the founders, all of whom are wealthy private investors who have sold companies for billions of dollars.

Willenz himself is an entrepreneur and serial investor in the chip sector who sold Habana Labs to Intel for $2 billion. He also sold Annapurna Labs to Amazon for $380 million and Galileo to Marvell Technologies for over $2 billion in 2000. Element Labs other founders are Willenz's partners in founding Habana Labs - David Dahan and Ran Halutz, and his former partner at Galileo, Manuel Alba-Marquez.

According to the Registrar of Companies, Element Lab's shareholders also include a US investment company called What Capital, which is headed by a local accountant, and is believed to represent several foreign private investors. The potential valuation that Willenz is seeking is believed to be particularly high at many billions of dollars, and is based on estimates that if Annapurna Labs was sold today, it would be worth at least $20 billion. Even Habana Labs, which could operate independently of Intel, could today be a multi-billion dollar company. Due to the fact that Element Labs operates on a model that provides a customized service, selling a complete system and because of the capital required for product development, the company could not be sold easily. In any case, the industry believes that Element Labs plans an IPO and to avoid being acquired, if possible.

"There is big hype around the company"

Senior tech industry sources and industry service providers tell about the stealth behavior of Element Labs, which is not typical of tech companies striving to hire employees. None of the company's founders or employees have announced on social media that they have started working there - moreover, many of its employees and senior executives are still listed on LinkedIn, for example, as employees of Habana Labs, where the company's entrepreneurs were previously employed. The company's founders shun the media, have not built a website and do not hire employees through placement companies.

The recruitment strategy has been built entirely on word of mouth and networking, which creates a certain mystique around the company. "There is a lot of hype around the company," says a tech company placement manager on condition of anonymity. "Candidates ask me to help them get there or connect with people who work there." In addition, senior CEOs admit that they face stiff competition for experienced development engineers and that they have lost employees to Element Labs on several occasions, even when they were in advanced stages of hiring.

Interviewed by "Globes" last year, Willenz, who moved to Switzerland as an act of protest against the Israeli government and Israel Tax Authority, said that he would stop making new investments in Israel, but would support Israeli entrepreneurs who founded their companies abroad. However, according to senior industry figures, Willenz continues to come to Israel and visit the company's Tel Aviv offices.

Dahan and Halutz retired last year from Habana Labs, which was sold to Intel for $2 billion six years ago but failed to integrate into the market, possibly because it was sold to Intel at an early stage. Intel, which maintained the company's independence, recently merged Habana Labs into its operations as part of its reorganization process, and many employees at Habana resigned, many of whom moved to Element Labs.

No response to this article was forthcoming from Element Labs.

Published by Globes, Israel business news - en.globes.co.il - on January 8, 2025.

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