Israel’s largest private employer, with fifty-four hundred workers, by the nation’s thirtieth anniversary. Intel’s investment in Israel, while seemingly a gamble at the time, would go on to become central to the company’s success. Intel Israel was responsible for designing the chip in the first IBM personal computers, the first Pentium chips, and a new architecture that analysts agree saved Intel from a downward spiral during the 1990s, as we chronicled in chapter 1. In the southern Israeli town of Qiryat Gat, Intel built a $3.5 billion plant where Israelis designed chips with transistors so small that thirty million of them can fit on the head of a pin. As remarkably, Israel’s emergence as a critical manufacturing center for Intel proved that nothing could stop its production, even a war.
“We will trust your judgment, Dov. Do whatever you must do.” That was the message of Intel’s management days after the January 1991 start of the Gulf War.
Iraq had invaded Kuwait five months earlier. From the moment Frohman heard the news, the worry that he might have to send all his workers home began to creep into his thoughts—during quiet moments driving into work, waiting on the tarmac for takeoff, or before bed at night. He knew that to
While hundreds of thousands of U.S. troops deployed to Saudi Arabia in preparation for war, Frohman was distracted by the risk Intel was undertaking. That gamble was a product of IBM’s decision, in 1980, to give Intel its big break, choosing the 8088 chip to power the IBM PC. But the computer giant had forced Intel to license its technology to a dozen manufacturers; even though Intel had designed the 8088, IBM thought it was risky to rely on Intel alone to manufacture the chip. So Intel was able to earn only 30 percent of the total revenues. Security and price leverage for IBM meant lower profits for Intel.
In 1983, with the 286, its next-generation chip, Intel had managed to convince IBM to cut the number of manufacturers to four, thereby increasing Intel’s own share of the work. And by 1985, after investing $200 million and four years of development in its even faster 386 chips, Intel had been prepared for a gamble. This time, IBM had acquiesced to Intel’s request to become the sole manufacturer of the chip that would power most of the world’s new desktops. This strategy would maximize Intel’s profits, but also its risk. What if Intel could not ramp up its manufacturing capability in time? And the bigger risk was the decision made by Intel’s management in Santa Clara to center much of this new responsibility in Israel.
The main burden fell on Intel’s Israeli chip plant in Jerusalem, which produced about three-quarters of Intel’s global output by running two twelve-hour shifts, seven days a week.
But now that output was under threat. Saddam Hussein had declared that if the United States launched an offensive, he would respond with missile strikes against Israel.
The Israeli government took Saddam at his word. Iraq had Scud missiles that could reach Tel Aviv in under ten minutes, and those missiles might be armed with chemical warheads. In October 1990, the Israeli government ordered the largest distribution of gas masks anywhere since World War II.
It was a surreal time in Israel. In kindergartens, teachers showed five-year-olds how to put on their gas masks in case of attack, and everyone practiced rushing to specially prepared “sealed rooms” if the sirens went off. The distribution system for the masks was elaborate, with every household receiving a note in the mail telling them where they could pick up the equipment. The IDF placed its Home Front Command offices in malls, so it was not uncommon to pick up some new shoes and a cup of coffee along with a set of gas masks for the whole family.
Frohman did what every Israeli manager does during or in advance of war: he drew up contingency plans for the “standard” war scenario, in which employees would be called up for reserve duty. Most Israeli men under forty-five serve in the reserves for one month every year. During an extended war, these civilian-soldiers can be called up for as long as the government deems necessary. This exacts a huge economic toll on businesses in Israel—including lost work days and less productivity—even during peaceful times. During a war, employees can be absent for weeks or even months. As a result, some Israeli businesses go bankrupt during war.
In early January 1991, U.S. and European commercial airlines suspended or curtailed their flights to the region. On January 11, four days before the United Nation’s deadline for Iraq to withdraw from Kuwait, the U.S. government advised its nationals to leave Israel. On January 16, the Israeli government announced that all schools and businesses, except for certain essential enterprises (the electric utility, for example), must close for the week and maybe longer. The government wanted people at home, off the roads, and poised to hop into their sealed rooms at the sound of air-raid sirens.
For Frohman, compliance with the government’s directive would mean suspending the production of Intel’s 386 microchip at a critical moment for the company. Frohman expected to have management’s full support for a shutdown, but he also knew that just because an employer is willing to grant an employee sick leave, it does not mean that their relationship will go on unaffected. Especially when the “ailment” is one that could conceivably repeat itself in the future.
