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Connecting Israeli Innovation to the World
Semiconductors

Eyal Waldman: Israel has huge advantages in Semiconductors

One-on-one Interview with Eyal Waldman: Israel has huge advantages in Semiconductors

Eyal Waldman, CEO and one of the founders of Mellanox until it was acquired by Nvidia, relates how a small Israeli company reached a global leadership position and how to become a successful entrepreneur in the semiconductor industry

Credit: Hava Tratner

 

20 years – that is the time it took for Mellanox to transform from a small company into a giant in communication solutions at data centers. The company was sold to Nvidia for $6.9 billion. Eyal Waldman, who founded the company in 1999 together with Michael Kagan, Roni Ashuri and Shay Cohen, recalls how it all started: “I was abroad, and I saw that there was a new standard in chips. I decided to leave Galileo, the company I had co-founded in1993, developing chips for communication networks. Some friends from Israel and the USA joined me, and that is how we founded Mellanox. “In 2000 we started sales, and in 2005 we became profitable. In February 2007, we issued Mellanox on Nasdaq and continued to grow, until we reached a value of one billion dollars in 2018/2019. In 2020, the company was sold to Nvidia for almost 7 billion dollars”.

Mellanox’s beginnings were indeed modest, but the company, which focused on the development of Infiniband chips to speed up communication between servers – quickly built itself into a position of global leadership, on par with giant companies. The explanation for this tremendous leap, says Waldman, who recently won the Israel Prize for Entrepreneurship and Technological Innovation, “depends only on the people. My team was excellent, with the most professional people in the world, and with the best understanding of the product”.

Mellanox was exceptional in that it not only developed advanced chips but also provided complete solutions for its customers – the telecommunications giants. To the question why the company did not prefer the conventional route – to focus only on solutions or only on the production of chips, Waldman answers: “Our model has significantly increased the bottom line. It is an added value in terms of contact with end customers. The higher you go up the food chain, the better the position you are in to make more money, and more importantly it allowed us to increase both revenues and profits for the customer significantly”.

The model of the upper floor in the food chain

Waldman’s concept, according to which the more the company provided a complete and comprehensive solution, the stronger Mellanox’s position in the market. It was tested and became more refined and accurate throughout the impressive life of the company. At its peak, on the eve of its sale to Nvidia, Mellanox produced its own chips, communication modules and hardware systems and the entire software environment that supported its high-speed connectivity solutions.

This approach was also the compass by which it made bold purchases, the two largest and most important of which were actually of Israeli companies. At the beginning of 2011, when Mellanox was still almost at the beginning of its journey, it purchased the Israeli company Voltaire for 218 million dollars.

Voltaire provided communication infrastructure solutions and computer networks for data centers, while Mellanox was still a company focused on high-speed communication in the supercomputer market. The merger created a leading provider of end-to-end connectivity solutions.

When asked why he made the deal, Waldman explained: “It’s related to a long-term strategy. Our ability to demand a high price for our products lies in the fact that customers do not have a substitute that competes with us in price. The transaction strengthens us through integration: we also rise vertically to the application level, both providing a complete end-to-end solution and also strengthening the dependency between hardware and software. The result will be a solution that is both better and one that does not allow us to be replaced by another company”.

Only five years later, in early 2016, Mellanox purchased EZchip for $811 million. Ezchip produced communication processors for the telecom market, which at the time was a declining market. Giants that operated in it, such as Marvel and Broadcom, left it. Mellanox took the opportunity to incorporate Ezchip’s engineers and direct the processors to the developing field of data centers.

In a meeting with journalists immediately after the completion of the deal, Waldman explained: “The combination between our communication speed and the intelligence of Ezchip processors will make it possible to perform smart operations not only with the help of Intel’s processors but also with our internal processors (which Mellanox developed later and today form one of the pillars of Nvidia).

 

“There are many chips companies in Israel and great accumulated experience”

Waldman says that the question of whether to move Mellanox abroad never came up. “We are Zionists, this is our country. We want to have an Israeli high-tech industry here and that most of the money will stay here,” he says, adding that “there is added value for Israeli companies”.

The Israeli high-tech industry was a worldwide phenomenon, among other things thanks to its creativity, innovative solutions and speed of response. However, says Waldman, entrepreneurship in the field of chips is different from entrepreneurship in other high-tech fields. “Here, you have to be much more professional in everything you do. There is real production of iron here, which requires a lot of money, and just setting up a factory costs billions of dollars. In order to export, you have to raise more money. Additional areas of professionalism are also needed, and the implications of operation and maintenance of such an enterprise is huge, much more so than in a normal software company. Therefore, entrepreneurship in the field of chips is something that should only be reached after gaining a lot of experience, and learning to get to know different disciplines”.

Today, Waldman maintains a key position in Israeli high-tech, as he invests in several companies and sits on the boards of many of them. “Our chip industry continues to grow very well. As technology advances, there will be more and more components that require chips in everyday products as well, so the industry will continue to grow significantly and provide products for a large variety of applications and markets,” he says.

“It is important that Israel have as many startups as possible in the field. It is indeed an attractive field, but it is not easy to be in. However, perhaps Israel has an advantage over other countries, because here there are many companies that deal with chips, and large accumulated experience. I think it is a very profitable field, As soon as they know what they are doing, the number of exits will be extraordinary”.

 

eyal waldman
Introducing Mr. Eyal Waldman

Age: 63

Personal status: Father of three. His daughter, Daniel ‘R.I.P, was murdered in the Hamas attack at the Nova Music Festival near Ra’im on October 7, 2023, along with her life partner, Noam Shay.

Eyal holds a: Bachelor’s Degree in Computer Science and a Master’s Degree in Electrical Engineering

Current professional occupation: Serves as Chairman of Waldo Holdings, a private investment company he owns.

Awards: Waldman received the Israel Prize for Entrepreneurship and Technological Innovation in 2024.

Another feature: As part of his work at Elbit, he was involved in the development of software for the “Lavi” project – an Israeli venture to produce a battle plane.

 

פרס ישראל

Eyal Waldman receiving the Israel Prize, 2024 Photo: PR

 

משפחת וולדמן

From right to left: the daughter, Sharon, Eyal Waldman, the late daughter Daniel and the son, Guy  Photo: PR

 

מלאנוקס

Mellanox’s Headquarters in Israel Photo: Roni Lifshitz. The company was sold to Nvidia for $6.9 billion

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