The move follows an April agreement under which state-owned Israel Aerospace Industries, flagship of the country's defense sector, will build the wings for Lockheed Martin's F-35 Joint Strike Fighter.
Israel's business daily, Globes, said Lockheed Martin will collaborate with Israel's Bynet Data Communications to build the Israeli military's Intelligence Corps center in the Negev Desert, south of Tel Aviv, a program known as Project 5/9, worth $210.6 million.
"The intention is to establish a local branch of Lockheed Martin in Israel in the field of information systems," said Lockheed Martin's Vice President for Global Solutions, Robert Eastman.
Globes said the U.S. defense giant will mainly handle "migration," adapting lines of code written decades ago to advanced computer systems. The center will provide support and maintenance services.
"We specialize in carrying out especially difficult migration to computer systems," Eastman explained.
Lockheed Martin and Bynet founded a joint venture, LB Negev, for the 5/9 Project. Bynet owns 51 percent and Lockheed the remainder.
Bynet's chief executive, Alon Ben-Zur, said the Israelis approached Lockheed Martin because of the complexity of the project. "There's no Israeli company which knows how to do this," he said. "You need someone with experience."
Israel's military intelligence is currently fast-tracking its cyber warfare capabilities to meet a growing threat, primarily from Iran. In March, the Defense Ministry urged Israeli companies to produce a new generation of systems to bolster the Jewish state's cyberwar capabilities as it braces for attacks using new viruses.
Lockheed Martin, which is involved in highly classified military projects like the F-35, has extensive cyber defenses of its own. "We have about 30 attacks a day," Eastman said.
The Israeli production line for the F-35 wings is scheduled to start running in 2015 under the 10-year contract with Lockheed Martin that's potentially worth $2.5 billion to Israel.
The Israeli air force ordered 20 of the stealthy fifth-generation fighters, considered the most advanced in the world, in October 2010 for $2.7 billion, and plans to buy 75 altogether.
IAI's Lahav wing production division produces wings for Lockheed Martin's F-16 and the U.S. Air Force's T-38 trainer aircraft.
"IAI has for years provided critical components for a range of Lockheed Martin platforms," said Steve O'Brien, Lockheed's VP for F-35 business development.
"Participation in the F-35 program is a natural development in our relationship."
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