Awz’s $1.5 billion chip factory plan shrouded in uncertainty

The Awz investment group announced on Thursday plans to establish an advanced chip manufacturing plant (fab) in Ashkelon, with an investment of NIS 5 billion (approximately $1.5 billion). But who will cover the costs? Despite the significance of the announcement, the group was unable to provide clear answers to fundamental questions, chief among them: where will the knowledge and expertise required to build the plant come from, and how will the project be financed?

Awz is a Canadian-Israeli investment group that has operated for nearly nine years and manages $500 million in venture capital. According to the group, it focuses on investments in quantum, photonics, and AI companies. Awz was founded by Yaron Ashkenazi, who serves as CEO. The company announced plans for a “groundbreaking” factory in Ashkelon to produce chips for both defense and civilian industries, in cooperation with the Ministry of Economy and Industry, the Ashkelon Municipality, the Ministry of Finance, the Israel Lands Authority, and the Innovation Authority.

The planned plant will not produce silicon chips, the type used in most modern processors and AI chips, typically manufactured by companies such as Intel and Taiwan’s TSMC for firms like Nvidia and Apple. Instead, it will focus on chips based on III–V semiconductor technology. This approach uses compounds that combine elements from the 13th, 14th, and 15th groups of the periodic table, such as gallium arsenide (common in communication components) and gallium nitride (known for its radiation resistance and use in space applications).

Semiconductors in this category offer several advantages over silicon, including higher electron mobility, greater power efficiency, and superior light emission. These properties make them valuable for use in advanced communications systems, quantum and photonic sensors, and fast chargers, key components across defense, telecommunications, AI, and quantum computing industries.

Most companies manufacturing III–V semiconductors today are large corporations such as Broadcom, Osram, and Infineon, which use them internally in their own products. Global chip giants like Intel and TSMC do not produce III–V chips, while the foundries that do are typically small and highly specialized.

If completed, Awz’s factory would join a select group of facilities worldwide producing III–V chips. However, major questions remain unanswered about how the company will deliver such an ambitious project.

Building a chip fab is a complex and capital-intensive endeavor, requiring advanced technical expertise and years of experience. The process involves specialized and extremely costly equipment, such as lithography systems for printing integrated circuits and epitaxy tools for growing crystalline semiconductor layers, as well as extensive infrastructure, including clean rooms, filtration systems, hazardous material management, and power controls. These projects require large teams of highly trained engineers and project managers, and even experienced operators face frequent delays and cost overruns.

Awz, for all its venture capital experience, has no prior track record in developing or managing projects of this scale or complexity. In response to a Calcalist inquiry, the company said that “the activity will be led by an international team of consultants established by Awz, including experts with decades of experience in establishing and operating advanced chip factories around the world.” However, Awz did not disclose who these experts are, what their past experience includes, or the extent of their involvement. In another response, the company stated: “The project will be established by leading industry bodies in collaboration with Awz.”

The group also declined to specify the sources of financing for the NIS 5 billion project, including how much will come from its own capital versus external investors. According to Awz’s own figures, the firm manages $500 million (approximately NIS 1.6 billion) in total investments. Even assuming full liquidity, an unlikely scenario, given that most capital is likely tied up in existing holdings, the company faces a funding gap of roughly NIS 3.4 billion. Awz said only that “the investors in the project include private international investors and others,” without providing further details.

Awz has not offered a detailed response beyond its press release and brief written statements, nor did it provide an executive for an interview. Such limited communication is highly unusual for a project of this scale, particularly in an industry as complex and costly as semiconductor manufacturing, where transparency, credibility, and technical detail are typically prerequisites for public announcements.