Israel’s defense AI ambitions caught in the crossfire of U.S. chip policy
Israel’s defense AI ambitions caught in the crossfire of U.S. chip policy
Biden’s export restrictions put Israel’s cutting-edge military innovations to the test.
The Artificial Intelligence Administration at the Ministry of Defense was inaugurated only a few weeks ago, and among the many challenges it faces is a looming crisis: the chip export regulations introduced by outgoing U.S. President Joe Biden, which will prohibit the export of advanced AI processors to Israel.
Just a few weeks ago, Defense Ministry Director General Eyal Zamir, his deputy Itamar Graf, and the head of the Israeli Directorate of Defense Research & Development (DDR&D), Danny Gold, cut a white ribbon to mark the inauguration of the new administration for artificial intelligence and autonomy.
Veterans of the Ministry of Defense described the moment as "historic," asserting that it reflects a clear-eyed understanding of Israel’s security challenges for the coming decades. Over the past two years, there has been no shortage of "historic moments" in the Middle East and Israel, but the significance of this occasion lies in its uniqueness: this is the first time in 24 years that the Ministry of Defense has established a new technology-focused administration.
The last such initiative was in 2001, with the establishment of the UAV Administration (unmanned aerial vehicles). That administration enabled defense industries to provide their cutting-edge UAV capabilities to the Air Force, capabilities that have been particularly evident in the current war. It is hard to imagine the IDF and Shin Bet managing the October 7 war without UAVs such as Elbit Systems Hermes’ series, or Israel Aerospace Industries’ Heron series. Since the outbreak of the war, these UAVs have flown thousands of hours, gathering intelligence, guiding ground forces, and striking targets in Gaza and deep into Lebanon.
Prior to the UAV Administration, the Defense Ministry established other pivotal entities such as the administration for missile defense, the Space and Satellite Administration for spy satellites, and the Tank and APC Administration, which develops advanced battle tanks, as well as the Eitan armored personnel carrier.
The new Artificial Intelligence and Autonomy Administration aims to provide the same technological edge. Statements by Defense Ministry Director General Zamir, who is also a leading candidate to replace Herzi Halevi as Chief of Staff, underscore the defense establishment’s ambitious goals. Zamir envisions future battlefields populated by mixed combat units of human soldiers and unmanned systems, as well as fully autonomous units capable of independent decision-making and engaging the enemy. He predicts that within 15 years—or possibly sooner—AI-powered robots will dominate combat on land, air, and sea. "Artificial intelligence is not just another technological revolution; it is a paradigm shift that will redefine warfare. A country that fails to invest in AI today will be left behind on the battlefield of tomorrow," Zamir warned.
The new administration is still in its infancy, just beginning to establish itself. A lieutenant colonel in the IDF is currently leading efforts to recruit talent from the civilian market, strengthen ties with defense industries, and collaborate with academia and startups working on cutting-edge AI projects. Once the administration is fully operational, it will draft a multi-year plan, appoint a civilian director, and secure a budget of several billion shekels—a serious investment befitting its importance. However, securing these funds and addressing other logistical challenges remain significant hurdles.
One pressing concern overshadowing these efforts is the impact of Biden's chip regulations. These regulations, aimed at curbing the transfer of AI technology to China, divide countries into three tiers. Tier one includes the U.S. and 17 allied nations such as Belgium, Canada, and Germany, which face no restrictions. Tier two, where Israel is classified alongside 150 countries like Mexico and Singapore, allows AI chip exports only under strict regulation and lengthy approval processes by the U.S. Department of Commerce. Tier three includes 25 embargoed nations such as China, Iran, and Russia, to which chip exports are entirely prohibited.
In response, the Knesset Science Subcommittee, chaired by MK Orit Farkash-Hacohen, recently held an emergency meeting on the implications of these regulations. Lt. Col. Elad Dvir, head of the Defense Ministry’s AI branch, highlighted the emerging threat: "We are increasingly losing our security independence, forcing us to alter IDF strategies and the cybersecurity framework." To mitigate the impact, the defense establishment is fast-tracking the procurement of AI chips, bringing forward purchases initially planned for 2026. This buying spree aims to stockpile resources before the restrictions fully take effect in four months.
The integration of AI into the IDF’s daily operations is a core element of its ongoing security practices, even amidst an active war. This highlights that the chip restrictions imposed by Biden’s reforms are not a distant concern but an immediate challenge. A recent investigation by The Washington Post, published about a month ago, revealed that the IDF maintained a high operational tempo using advanced AI tools like the "Habsora" system. This system enabled the rapid expansion of its target bank and supported a sustained rate of fire over time.
These capabilities leverage advanced data processing, machine learning, and algorithmic tools to generate actionable intelligence. For example, AI can analyze intercepted communications or compare current satellite images of relevant combat zones to historical ones, identifying changes that might indicate activities like tunneling in Gaza or the concealment of rocket launchers. While these processes once took weeks, AI-driven systems now produce results in minutes.
The potential impact of the U.S. chip restrictions has raised significant concerns within Israel’s defense industry. Recently, industry leaders expressed optimism that the defense establishment is exploring solutions. These could include accelerated procurement, developing alternative supply channels, or securing exemptions from the U.S. restrictions.
A senior executive from a leading defense company warned of potential delays in developing and producing critical weapons systems and subsystems. These systems are often urgently needed on the battlefield, including ad hoc technological solutions tailored for unique operational demands. This challenge arises amidst a historically high workload for Israeli defense industries.
The ongoing war in Ukraine has spiked global demand for Israeli air defense systems, especially from European countries. Simultaneously, the conflict in Israel has increased the IDF’s reliance on local defense companies to supply ammunition and missiles rapidly. Over the past year, the Ministry of Defense has placed unprecedented orders with major defense firms like Rafael, Elbit Systems, and Israel Aerospace Industries, totaling tens of billions of shekels. This surge in orders is expected to enhance Israel’s defense production independence, reducing reliance on imported weapons and shielding its operations from external pressure.
Trump’s role in the chip export ban
Donald Trump, who recently returned to the White House, has already demonstrated a proactive approach by brokering a hostage release deal with Hamas and securing a ceasefire in Gaza. These actions have fueled hopes within Israel’s defense sector that he may remove Israel from the U.S. chip export ban list.
However, not everyone is optimistic. Dr. Ariel Sobelman, a senior researcher at the Institute for National Security Studies (INSS), said: "Security systems will be at a significant disadvantage due to lower computational power than that required by artificial intelligence chips for combat. Terrorist eliminations may fail due to too slow command execution." He added that while there is hope for Trump’s intervention, it is better to temper expectations:
"Waiting for miracles is not a strategic plan. The key to freeing ourselves from this grip lies first and foremost in Israel's transition to the list of countries belonging to the first tier. Achieving this goal depends on completing its dialogue with the U.S. administration on the Trusted Technologies framework (TTE). The U.S.'s concern about information leaking to China is great and real."
Israel’s strategy for AI competitiveness
Israel’s vulnerability to the chip shortage is partly self-inflicted, stemming from its ties with China. A source close to the defense establishment criticized Israel for its lack of strategy, citing examples like its use of Chinese-built infrastructure and technology, which have strained relations with the U.S.
Globally, countries like the EU, Taiwan, Japan, and South Korea have already adopted national technology laws to bolster their AI industries. In contrast, Israel lacks a comprehensive strategy or legislative framework to compete in the evolving AI landscape.
Dr. Sobelman estimates that Israel needs to invest approximately 4 billion shekels to develop the infrastructure necessary for a competitive AI industry. This includes building server farms, connecting them to the national power grid, and reforming the education system to align with technological advancements. Such efforts are essential for Israel to secure its place in the AI-driven era and reduce its dependence on external chip supplies.
