"Imagine an F-16 pilot identifies a threat and launches a laser beam at the speed of light. This is a revolution"
"Imagine an F-16 pilot identifies a threat and launches a laser beam at the speed of light. This is a revolution"
Elbit Systems CEO Bezhalel Machlis discusses the transformative potential of battlefield lasers, the challenges of scaling up production during wartime, and the global demand driving Israel's defense industry to new heights.
"Come on, let's go see some iron," says Elbit Systems President and CEO Bezhalel (Butzi) Machlis after a two-hour conversation about a powerful laser that is supposed to completely change the battlefield, and about the foreign armies that will continue to storm the Israeli arms industry in the coming years and arrange for the companies operating in it to submit particularly impressive reports.
The "iron" that Machlis is talking about are the products of the Elbit weapons factory that operates in the northern region and constitute the complete antithesis of all the knowledge-intensive technologies, artificial intelligence, and algorithms that Machlis identifies as the main growth engines of the arms giant that he has managed for the past 12 years.
The production line operates feverishly in an outdated industrial building, telling a central chapter in the story of the longest war in Israeli history. Since the afternoon of October 7 last year, when shocked workers were called in and started the machines, there has hardly been a moment of calm.
The processes taking place here are critical to the availability of the shells and bombs needed by the IDF's tank crews, artillerymen and infantry brigade fighters in this never-ending war. This is where the defense establishment's unprecedented demand for the simplest ammunition - the bread and butter of the battlefield - flows. What comes out of here every day defines what will be available to army units in warehouses and on the front line. In times of overt or covert arms embargoes, and a global shortage of ammunition due to the proliferation of conflict and combat zones that are straining defense companies around the world, this is one of the most important production sites for the country's defense industries. "You see, Elbit was established in the 1960s because of the French and British arms embargoes to provide Israel with a local electronics industry. See how the circles close," says Machlis.
The factory in the northern region is defined as an inert factory — that is, a factory that does not deal with explosives or things that explode. Since the beginning of the war, its line has been operating around the clock, in three shifts, seven days a week. The steel casings it produces are transferred to a factory in Ramat Hasharon, where they will be filled with explosives, and then fuses and various electronic accessories will be inserted into the contents that will turn them into mortar bombs, 155mm shells for artillery, and 120mm shells for IDF tanks.
This factory became part of Elbit when it purchased the Israeli Military Industries (IMI) from the state six years ago for 1.9 billion shekels. It was one of the most dramatic moves in the history of Israel's defense industries, and Machlis is pleased with it and believes that Elbit's patience and determination in this matter have proven themselves. "We got this factory after IMI was in a very bad financial situation. It was neglected, the floor was black with soot," he recalls. "People used tongs to put the steel blocks, each weighing dozens of kilograms, into the ovens, and that's how they would take them out of the press and back again. Everything around was shrouded in smoke, grease everywhere, filth. There were a lot of people at each workstation, they had to change jobs every hour because of the crazy heat."
Even through the smoke and the efficiency problem at IMI, which had been losing money for years, Machlis saw the potential. "We invested a lot of money here and in the other IMI factories on automation to increase productivity and improve quality. We brought in robots that tripled production output. At the beginning of the war, the Director General of the Ministry of Defense, Eyal Zamir, called me and said, 'We need 155 mm shells, we need shells for tanks, we need more mortars and aerial munitions, and we need to produce everything on completely different orders of magnitude.' At that moment, all the processes that Elbit had gone through in recent years came together at once. We are truly very lucky that we started upgrading the production lines a little before the war."
What would have happened if you hadn't done this?
"In this war, we learned that where there is no local production capacity, there are difficulties. The defense industries in Israel, not just Elbit, all brought their full strength to this campaign as part of the effort to reduce our dependence on others. It is clear that it is impossible to do everything, including a very large effort to reduce dependence on foreign suppliers on such short timelines, but I think it is strategically correct."
And economically, is this a move with long-term prospects?
"First and foremost, we are an Israeli, Zionist company that is committed to the security of the state and to participating in its dealing with all the threats that are directed at it, even if it is not always the most economic, the most optimal and the most correct. This situation has advantages and disadvantages, because control of the entire value chain is a more expensive thing because it requires holding entire assets even in times of calm when there is no security certainty about their viability. On the other hand, it allows for a broader view in terms of controlling costs and technology so that it can be taken from one point to another completely different point in a way that can improve the positions of a company like ours. It also creates more jobs. In the coming years, there will be enormous security challenges that will occupy the world, and this is with all due respect to Israel. The demand for security is enormous and it increases Israeli exports and greatly strengthens our position."
"The aerial laser will be the next generation"
Elbit Systems is traded on Nasdaq and in Tel Aviv with a market value of approximately 40 billion shekels. It owns dozens of subsidiaries around the world and more than 20 production sites across Israel. Its controlling shareholder is Mikey Federman, and it has been managed by Machlis since 2012.
Elbit's product portfolio includes unmanned aerial vehicles (UAVs), such as the Hermes 900 and Hermes 450, which are also used by the Israeli Air Force for surveillance, intelligence gathering, and attack missions; an active defense system for armored vehicles, the Iron Fist; precision surface-to-surface rockets with ranges up to 300 kilometers; multi-purpose launchers; command and control systems; communication equipment; loitering munitions and cruise missiles; remotely controlled firing positions; unmanned vessels; advanced sonar systems; self-propelled guns; night vision devices and helmets for pilots; electronic warfare systems; and mortar bombs guided to their targets using lasers.
What’s missing from your portfolio?
"The truth is, not much. The acquisition of IMI has been nothing but beneficial for Elbit and for the Israeli economy. It allowed us to take the firing systems from IMI, along with all types of armaments, and improve them by incorporating Elbit technologies such as advanced homing heads, smart fuses, and connections to all of our systems—including drones and command and control systems. All these components are integrated into a single product offered to our customers worldwide. Customers are looking for solutions, and most of them don’t want to buy a single product. Elbit is a vertically integrated company that controls the entire value chain, enabling us to offer integrated solutions: the radar that detects, the electro-optical system that sees, the command and control system that transmits information to the decision-making center, which is based on artificial intelligence and can choose the appropriate weapons system to respond—whether it’s a bomb from a fighter jet, a tank shell, a cannon shot, or a precision missile or rocket."
In this war, your competitors have impressive air defense systems. Are you lacking in this field?
"Elbit's air defense system will be the aerial laser, which will be the next generation in this field. It is not sustainable to intercept so many air threats using kinetic solutions, and the current war proves it. Economically, it's impossible to base defense on such a large stockpile of weapons and finance it over time. I’m not saying that there will be no need for kinetic weapons against missiles and rockets—they will always be necessary as a last resort. But the first line of defense will be a powerful laser, and we are one of the world leaders in this field."
It sounds futuristic and, above all, very challenging.
"In the air, the laser is much less affected by weather conditions. It will be mobile, mounted on aircraft, and capable of dealing with targets at much greater ranges than ground defense systems. A laser generator will be installed on the nose of a large aircraft or carried by a fighter jet. It will be able to connect to all systems for identifying aerial threats and destroy them at remarkable speeds. Imagine a situation where an F-16 pilot identifies an approaching threat and launches a laser beam at it at the speed of light, instead of a missile. This is a revolution on the battlefield, and it’s not very far off. I’m not just talking about intercepting aerial threats, but about a wide range of energy-based weapons. We are making huge investments in this field and advancing rapidly."
Give me a glimpse of all this potential.
"Think of energy weapons activated from space. It might sound crazy, like science fiction, but we will get there too. Imagine central collection and control systems managing a massive number of sensors on land, in the air, and in space, with the ability to activate energy from all of them simultaneously in a centralized manner. These are new realms of warfare, and that’s where we’re headed."
The challenge is that our enemies are also advancing in this field. One day, they will close the gaps, and a new and terrifying threat will emerge, requiring a defensive response.
"There’s always a learning battle between us and the enemy. I always need to know how to adapt faster than my competitors and certainly before my enemies, because the pace of change is key to success. I’m sure they will close the gaps, and that’s why we need to stay ahead of them, constantly improving. This was proven in the current war, where the enemy also tried to challenge us. The Iranians are a sophisticated, intelligent enemy, and they have adapted to the IDF’s systems in various combat arenas, constantly trying to challenge them. It’s a learning battle, and you can always find weak points. By the way, this learning battle is still ongoing."
Who wins this learning battle?
"The one who adapts faster."
"The armament in Europe is not exhausted"
The past year was excellent for Elbit, as well as for the rest of the Israeli defense industries. The trend that began in early 2022, when Russia invaded Ukraine and launched a global arms race, has only intensified since then, and even more so since the outbreak of war in Ukraine in October 2023. In the third quarter of the year, Elbit’s revenue increased by 14%, reaching more than $1.7 billion, and its order backlog rose to a record of over $22 billion. Israel remained its primary market, accounting for about a third of its total sales.
The flood of orders from the Ministry of Defense arrived when Elbit’s factories were already working at full capacity, fulfilling previous orders from customers worldwide to which the company is contractually committed. According to Machlis, "The activity in our business environment is a long-distance race, and the war here has intensified the need to provide the IDF with immediate solutions. This means identifying problems that continuously emerge and offering solutions through products and systems in very short periods of time. We’ve quickly adapted to the changing needs of the defense establishment and to operating at a much higher pace than in previous years. This will remain with us for many years to come. We will need to continue delivering solutions on very short timelines to meet the evolving needs of the battlefield."
These immense efforts are benefiting Elbit’s numbers. An annual sales target of $7 billion, set for 2026, has already been moved up to the coming year, along with the goal of improving its profitability rate to about 10%. "I estimate that Elbit will continue to grow at rapid rates in the coming years, simply because we need to address our huge backlog. We’ve never had so many business opportunities, and the peak is still ahead of us. The demand is enormous and will only grow in the years to come," he says.
“The great armament in Europe following the war in Ukraine is still far from being exhausted. You see, the Europeans do not have the capacity, in terms of the number of defense industries operating on the continent, to meet the demand. For many years, they did not invest in defense, and these industries have almost disappeared. The fact that Elbit has many subsidiaries operating in Europe has integrated it into the ecosystem there, giving it tremendous power. The United States is also allocating huge budgets to strengthen its defense, and we’re seeing the same trends in Southeast Asia, in countries like India, the Philippines, Japan, and South Korea, where defense budgets are growing significantly."
"We have taken in dozens of IDF wounded soldiers"
And yet, despite the record demand, the large backlog, and the optimistic outlook for the Israeli arms company in a world where dark storm clouds are gathering, Machlis says that "the past year has been the hardest of my life." For him, it’s enough to mention that his two sons are fighting in combat units in the IDF—one a 24-year-old Technion student, and the other recently discharged from regular service and immediately called up for reserve duty—to explain the statement.
Many sleepless nights?
"I haven't had many hours of sleep this year. Without a doubt, this is the most difficult and challenging year I’ve had."
How do you get through a year like this without going crazy?
"We do what we can. On a personal level, it's obviously complicated, and with Elbit and internationally, it’s also very challenging. But the hardest moments were with the bereaved families of our employees. Seven of our employees have fallen, and there are children of employees who died. The intensity of the pain is unimaginable in all the surrounding circles. We haven’t even reached the stage of containment yet."
What are you doing about it?
"As a company, Elbit is committed to embracing these families tightly—forever. We have taken it upon ourselves to absorb wounded soldiers from the campaign, integrating them into our sites across the country. We help them learn, integrate into workplaces, and provide professional technological solutions to ease their recovery and rehabilitation. So far, we’ve absorbed dozens of wounded soldiers and will absorb more."
Many of Elbit's employees were called up for reserve duty for extended periods during a time when activity was constantly increasing. At what point did you also call on retirees to come and help on the production lines?
"In Israel, Elbit employs about 14,000 people, and at the beginning of the war, about 20% of them were in the reserves. That’s a lot. Even today, about 10% of our employees are still in reserve. We hired about 1,000 new employees last year, and in the coming year, we will hire over 1,000 more. We recently opened a new drone production facility in central Israel and began operating our new industrial complex in Ramat Beka in the Negev, which includes several dozen manufacturing plants. We’re hiring hundreds of employees at a high rate there and training them in unique frameworks we’ve set up."
This is happening, in part, because Israel no longer has the technological education infrastructure that provides skilled workers for industry.
"The State of Israel must step up in this area and invest in strategic thinking. I see what’s happening in other countries that are investing in their future generations and industries, and we must make progress in this area. What we’re doing with specific training is just a drop in the ocean."
According to the TIMSS tests, Israeli students are declining in math and science. Does the question cross your mind about who will develop the mega-sophisticated missile that will break the deadlock in 15-20 years?
"This issue is very troubling to me. For years, Israel has failed to produce more engineers, maintaining a constant number of engineers, and we must not forget that technology and the high-tech industry are essential components of the strength of the economy and are key to its growth. Investing in education is just as strategic as investing in other important areas, and in my opinion, the system isn’t where it needs to be. The state must invest in technological subjects as early as elementary school and continue through high school, encouraging students to pursue five points in math, physics, and other real-world subjects. It’s essential."
Does Elbit pay a price for being an Israeli company?
"Certainly. There are BDS actions against us and damage to supply chains, for example. But we’ve been able to handle these challenges. We’ve ensured the IDF gets what it needs, bringing astronomical amounts of raw materials into the country to keep the production lines running for the IDF. It required enormous efforts, and we met that challenge with honor, but it wasn’t trivial."
While facing unprecedented production pressures, missiles and drones are falling on us, and your two sons are fighting in Gaza, Elbit’s overseas employees have become targets for BDS activists. Their protests have even turned violent.
"Very violent. There have been cases where our people were attacked with hatchets. IEDs were planted at Elbit sites. In some cases, factories were broken into, and property was vandalized. Not to mention that some of our investors have sold their holdings due to pressure and strong protests from BDS activists. Our managers worldwide have handled this with dignity. Fortunately, in some countries, law enforcement has intervened and prosecuted some of those activists, whom I consider to be terrorist activists."
When the conversation with Machlis turns personal, it’s clear that he becomes more reserved, careful with his words. "I don’t intend to reveal everything," he says, acknowledging the barrage of questions that are not related to explosives.
He was born in Ramat Gan 61 years ago, served in the artillery, and was an artillery company commander in the reserves. During the Second Lebanon War, he was at the center of fire for the Northern Command. He studied at the Technion, earning two degrees simultaneously—one in mechanical engineering and the other in computer science. During that time, he worked at Elbit in an engineering position. That same year, he lost his father, Moshe, who was also an officer in the artillery corps and the chief engineer at the metal factories of Kibbutz Netzer Sereni. "There isn’t a day that goes by without me thinking about him. I got my love for engineering, industry, and defense technology from him," he says. His mother, Nechama, was born in Poland. Her father, Bezalel, whom he is named after, was a partisan. He is the eldest of three siblings—his brother is an accountant, and his sister is a psychologist. "They’re much more talented than I am," he says. He lives in Zichron Yaakov, is married to Sharon, a veterinarian, and they have four children: a 24-year-old student, a 21-year-old discharged soldier, an 18-year-old high school student, and a fifth-grade daughter. "My bond with my brother and sister is strong; we’re a connected, close-knit, and loving family. We’re all united in every fiber of our being. It’s something our parents instilled in us, and it’s our duty to them. I’m very proud of that."
