This week, Reuters reported that Intel is considering a further US$10 billion investment in Israel.

The main impetus will be to upgrade an existing fab facility. This will add to the three sites that the chip multinational operates in the Holy Land and will thus double its current regional investment.

To illustrate the importance of Intel to Israel’s economy you need go no further than the listing of income for the largest private sector companies. Looking at 2012 figures, Intel is ranked third with 17.7 billion shekels – around US$5 billion.

But why Israel?

Bloomberg recently put together a video that explained the secret of the country. Nir Barkat, mayor of Jerusalem and former entrepreneur, summed it up a meeting of start-ups last night at the Jerusalem College of Technology.

• The army or geopolitical necessities forces on Israel a cultural of “having to succeed”.
• The local market is too small and so Israelis look to sell products overseas
• An education system that for its faults encourages questioning

And to show how this converts into real numbers:

Over 250 multinationals have research and development centers in Israel, 80 of them Fortune 500 companies, with a majority (66%) belonging to US companies. During 2011, international tech companies bought out 83 Israeli start-ups (many of which were either converted into or merged into existing R&D centers), with the buyouts amounting to $5 billion; meanwhile, during the first half of 2012, there were 50 buyouts, at a total value of $3.5 billion (not including the purchase of NDS by Cisco). Between 2002 and 2009, productivity by MNC units in Israeli grew by 121%, an average of 12% annually. This accounted for 15% of all business activity in Israel.

Just think how many pieces of hardware, check out registers in shops, units of medical equipment and more are being generated by intellect that is located in a country that is half desert and surrounded by enemies!