Huawei paying top dollar for Israeli Toga engineers
Chinese giant Alibaba may have closed its Israeli R&D center but Huawei really needs Western knowledge and experience, and is also willing to pay for it.
In May 2019, the US Department of Commerce put the Chinese telecommunications and technology giant on a blacklist. US companies or companies that use US technology require a US government license to sell to those that appear on this “Entity List.” Along with Huawei, another 68 of its subsidiaries from around the world were put on the list at that time. Some 46 additional subsidiaries were added to the list in August 2019.
But one name was surprisingly absent from both lists: Huawei’s R&D center in Israel, known as Toga Networks. Staff at Toga’s offices in Hod Hasharon and Haifa were also surprised the company was not included, and to this day it is not entirely clear how the Israeli subsidiary managed to avoid this. One explanation offered by employees is that Toga’s name, which does not have the word “Huawei” in it, confused the US authorities, but apparently this was not the case. In any case, in August 2020 the grace period ended, and Toga was included on the third round of the list along with other Huawei entities, from Chile to Singapore.
According to former employees, the Israeli subsidiary utilized the period between Huawei’s blacklisting and that of Toga for intensive stocking of testing and development equipment before sanctions would be imposed on it as well. In some cases, according to former employees, the suppliers, which did not want to risk entanglement with the US government, requested statements from Toga managers that the equipment would be used only by Israeli workers at the branch in Israel. Sources close to the R&D center claim there were no such special purchases, and that equipment was purchased only according to project needs.
After being put on the blacklist, Toga was prevented from using popular software like programming tool MATLAB. In its place, Toga employees use open-source alternatives, non-American software or tools developed by Huawei. In the wake of the sanctions, some employees also left the center, fearing that working for Huawei could harm their future careers, and especially future employment with US companies.
Nonetheless, two years after the listing, Toga’s R&D centers in Israel are bigger than ever, employing about 500 people in 12-14 research groups that are responsible for projects in various areas. Currently, while other development centers are scaling back on recruitment, Toga has 55 open positions. And although another Chinese giant, Alibaba, closed its R&D center in Israel last month, it appears that its Israeli development centers are of special importance to Huawei, precisely, perhaps, because of the American sanctions.
TOGA NETWORKS was founded in 2009 by Itzik Malobani, a former senior engineer at Indigo, and vice president of R&D at start-ups Connect One and Terrachip. Initially, Toga was an R&D subcontractor for the Huawei center in Germany, and the first project Malobani led was development of a chip
for Huawei routers. At the same time as Malobani, Amnon Senderovich, a former ECI vice president R&D, separately started work on software development for Huawei Germany; later the two teams merged under the name Toga.
Toga’s first office was in Herzliya, but after the company grew, it moved to Hod Hasharon.
“Huawei didn’t want the offices to be near the other telecommunication equipment companies, if only so that wouldn’t look small next to the competition. That’s why they eventually chose Hod Hasharon,” said a source familiar with the details. A Haifa branch was added a few years ago.
For years, Toga kept a very low profile and played down its connection to the Chinese parent company.
“Huawei wanted to keep a low profile because they have a lot of sales to Arab countries. It also suited the center in Israel, because they didn’t need publicity and PR at the time,” the source says. In 2016, Huawei officially acquired Toga from Malobani; since then, the relationship has become overt.
Toga, which is categorized as an R&D center, has work methods that differ from those of other foreign-owned development centers in Israel. While other centers develop a complete product from start to finish, or at least some component of a complete product, the Israeli team at Toga mainly builds a product and/or solution architecture that usually reaches, at most, the proof of concept (POC) or preliminary demonstration stage. The accrued knowhow is then transferred in its entirety to China, where the architecture is translated into a product or service. The center takes pride in the fact that it files 90-100 new patents every year.
Toga believes this approach best utilizes valuable Israeli engineers at the most important stage and does not “waste” them on things that can be done
more cheaply elsewhere. In many cases, Huawei’s standard method is to have several teams around the world work on the same problem; the team that makes the fastest progress wins the project. A former Toga employee claims this approach is problematic.
“Unlike other Western development centers in Israel, Huawei’s center in Israel is not responsible for a product,” he claimed. “Toga tells their engineers to take a problem, solve it and hand it over to the team in China. You’re not always sure exactly which product it will end up in. It sometimes feels like the goal is to siphon know-how from the employees.”
Sources close to the center reject this claim, and say that every project in Israel is linked to a team in China, and its goals are defined.
“No one would let us build a generic project,” they say.
According to these sources, when it comes to intellectual property transfer, the center takes extra care, and new Toga employees sign declarations that they are not bringing inside information from their previous workplaces with them: “Even at the interview stage, job candidates are told they do not have to answer questions which could reveal the commercial secrets of other workplaces.”
The insiders say that it was actually Toga that issued letters to other companies to ensure that employees leaving it would not take intellectual property with them.
In addition to the Israeli workers at the center, Huawei has brought a team of experts from China to Israel. The experts, engineers by profession, are affiliated with the various research groups. Their official role is to coordinate between the Israeli team and the accompanying Chinese team in the project, while bridging the language and mentality gaps.
However, some at the R&D center see the Chinese team as a supervisory element that conveys information about the progress in Israel to the team in China.
“The information always flows in only one direction: from Israel to China, not the other way around, and all decisions are made there,” claimed a former employee.
EARLY ON, Malobani and Senderovich, (who left the company a few years ago and now heads a consulting firm), made contact with executives in Huawei’s management, and managed to get them excited about Israeli innovation.
The center is proud of a series of significant developments for Huawei, such as a cloud database that retrieves data much faster than that of Oracle. Another development begun in Israel is a toolkit that enables developers to build and test applications that will run on the Huawei cloud.
At present, Huawei holds 18% of China’s public cloud market, and is trying to compete with market leader Alibaba, which has a 37% share. The competition is partly over the software and services provided by the various clouds.
“You have to understand that historically Huawei is a company that is used to selling boxes and physical equipment. It had no idea how to provide software as a service [SAAS], and it was the centers around the world that helped it with that,” says a company insider.
Toga’s Israeli employees are regarded as high-quality. Many have degrees in science or engineering from leading universities. Toga is known to pay very high wages and offer signing bonuses that are very generous relative to the market – this policy has angered several Israeli companies that have lost employees to them.
The LinkedIn accounts of Toga employees, and the company’s job ads, reveal the variety of areas the center engages in, including cloud storage, automotive, blockchain, computerized vision, databases, information security and video.
There are also some areas that might be considered sensitive, such as high-performance computing (HPC), or by its far sexier name: supercomputing.
In recent years, supercomputing has been a source of particularly intense strategic competition between the US and China. However, those close to Toga emphasize that the center firmly refuses to accept projects that could be considered dual-use technology, meaning, developments that can be converted to military use.
Also, with regard to supercomputing, the center only operates within the allowed parameters. In addition, Toga is under the supervision of the Economy Ministry, and must obtain an export license for technologies that can be converted to military use of some kind.
In at least one case, Globes has learned, Toga’s export license for a certain technology was revoked. In response, Huawei decided to transfer the development of the technology to Britain, where export laws are less stringent.