Will Israel’s Hi-Tech Industry be Affected?

Posted on June 25, 2008
Filed Under Business, David Waldman, Gogimon, International, Internet, Israel, Middle East, economics, economy, financial, high tech, investment, investors, money, technology | 1 Comment

Many High tech executives in Israel have been quoted as saying they are worried about the global slowdown and how it will affect the Israeli High Tech industry. Israel leads the world in High Tech export in percentages of its overall exports, 42%. Almost all of the money that goes into development is in dollars which have devalued greatly against the shekel. This means less real money flowing in to cover company expenses. When the product eventually does get developed it is sold in the American markets for shekel devalued dollars.

This simple equation just might discourage investors from any new investment in Israeli companies since ROI is continually being eroded. They will be receiving lesser chunks of future profits of a company making it even more risky to be in the high tech investment field A recent statistical report by Israel’s Central Bureau of statistics showed favorable results in terms of sales of high tech companies but those statistics may be misleading. “The sales may be up but the profits are definitely down” seems to be the mood and feeling of many CEOs wherever you go.

Israeli companies still have advantages on their American counterparts as the salaries in Israel are lower than American salaries for roughly the same development positions. This, coupled with the very large pool of highly qualified high tech personnel, make technology business prospects very attractive. These advantages are starting to erode and it is unclear how this will all play out. There have not been any massive layoffs or other negative signs in Israeli high tech, yet. Some analysts are predicting that the beginning of 2009 will bring with it the collapse of many high tech companies in Israel. Most have marveled at the resilience of the Israeli economy in general and the high tech sector in particular even during difficult economic and political times. This resiliency is being put to the test once again.

David Waldman

[The post's writer is the Director of Gogimon search agent]

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One Response to “Will Israel’s Hi-Tech Industry be Affected?”

Julie Waldman from HaMerkaz, Israel on June 26th, 2008 9:48 am

The biggest problem is that investments don’t go as far as they used to because of the dollar nosedive which means that in order to keep expenses even, while meeting investor goals, companies will have to go offshore with their development which will cut Israeli jobs. Alternatively Israelis will have to take lower salaries in order to balance the inequality.