The recent growth of Newport Corp.’s operations in Israel underscores the tenuous balance of investing in a global technology hub that’s under constant threat of warfare.
The Irvine-based laser maker on July 24 acquired its second Israel-based company, V-Gen Ltd., adding 50 employees to its workforce of 400 in the country. The same day Israeli military forces intensified operations against Palestinian factions in the West Bank and Gaza Strip—another chapter in a standoff that has flared into warfare four times in the past 10 years.
“There’s no other region where we have strategic investments that is as tumultuous as Israel,” said Newport Chief Financial Officer Charles Cargile. “Especially right now.”
Newport Corp. nonetheless sees Israel as a viable technology hub and source of engineering talent.
“The people of Israel are so accustomed to dealing with this type of disruption,” he said.
That explains why Tel Aviv-based V-Gen hadn’t reported any problems keeping its supply chain intact or shipping product as of press time.
Newport Corp. has kept its other operations in Israel humming, too, despite some of the disruptions that are typical there. Ten of the company’s employees were called to active duty in the military in recent weeks.
V-Gen represents new growth opportunities for Newport Corp. It specializes in fiber lasers, a fast-growing segment of the market that’s dominated by Oxford, Mass.-based IPG Photonics Corp.
Fiber lasers, which have gradually replaced carbon dioxide lasers, create more power at a lower cost than previous-generation lasers. Fiber lasers also are considered ideal for micromachining, precision marking and light detection.
Newport Corp. has about 2,450 employees, including 500 in Irvine.
The company posted revenue of $560 million last year and net income of $15.6 million.
V-Gen is expected to generate revenue between $15 million and $20 million in the first 12 months after the transaction closes, which is expected by October.
Financial details of the buy were not disclosed.
The company will fall under Newport Corp.’s Spectra-Physics lasers division based in Santa Clara, where the company employs about 350 people.
Earlier in Israel
Newport Corp. made an aggressive move into the Israel market in 2011, acquiring Jerusalem-based equipment maker Ophir Optronics Ltd. for $230 million. That deal was its largest ever and added about 650 employees spread over manufacturing operations in Israel and the U.S., and sales teams in the U.S., Europe and Asia.
Ophir had annual revenue of nearly $112 million and operating income of $12.5 million.
It specialized in precision three-dimensional measurement equipment and infrared optics, as well as photonics instrumentation. Its technology plays an important role in the infrared and long-range missile detection employed by Israel’s Iron Dome, one of the most advanced mobile missile defense systems in the world.
The Iron Dome stopped an estimated 90% of missiles fired into Israel cities, including Tel Aviv and Jerusalem, Israeli defense forces told news agencies last month. The Iron Dome system, which is set to receive $225 million in emergency aid from the U.S., is activated only when populous cities are deemed to be in imminent danger.
Common Ground
Orange County has long had close ties to volatile Israel, with the technology sectors in both places sharing a common heritage rooted in defense work.
Israel’s fertile venture capital sector; strong educational system that grooms top talent; emphasis on research and development; and a favorable tax environment have been an attractive mix for local companies, particularly chipmakers.
Irvine-based chipmaker Broadcom Corp. has acquired at least 10 companies there in the last decade. Defense, power and timing chip specialist Microsemi Corp. in Aliso Viejo has also heavily invested in the region, acquiring several companies.
TowerJazz
Israel-based chipmaker Tower Semiconductor operates its North America headquarters in Newport Beach, which houses critical assets for the country’s national defense.
Its unassuming, 120,000-square-foot factory on Jamboree Road churns out about 290,000 wafers annually—the foundation for chips designed by commercial, industrial and military customers.
Tower bought what was Jazz Semiconductor Inc. in 2008 for $40 million, plus an additional $129 million in debt.
TowerJazz’s history in the defense sector dates back more than 30 years. It got its start as the chipmaking arm of Rockwell International Corp., which no longer exists but left behind Milwaukee-based Rockwell Automation Inc. and Cedar Rapids, Iowa-based Rockwell Collins Inc.
The company is Orange County’s second largest chipmaker, with 643 local workers.
