Israel’s High-Tech Sector Thrives Amid War with $9 Billion in Investments

Israel’s high-tech sector has demonstrated remarkable resilience, securing nearly $9 billion in investments despite ongoing war, according to a new report by the Israel Innovation Authority. From the start of the conflict through mid-August 2024, Israel has ranked as the third-largest recipient of global tech investments, trailing only Silicon Valley and New York City. This strong performance has propelled Israel ahead of other major tech hubs such as London and Paris.

The high-tech industry plays a critical role in Israel's economy, accounting for more than 50% of the nation’s exports, one-fifth of its Gross Domestic Product (GDP), and generating a quarter of all state revenues from employment taxes. Yet, the report highlights a concerning stagnation in key performance indicators over the past two years, with the total number of high-tech workers holding steady at around 400,000, or 11% of the national workforce.

The Israel Innovation Authority noted that this stagnation could impact state revenues in the coming years. “Since high-tech workers contribute a significant portion of the income tax, this stagnation may affect the state’s revenues at a time when it is facing a deepening deficit,” the report cautioned.

While global employment in the tech sector grew substantially in 2023 by 5% in Europe and 2.8% in the U.S. Israel's high-tech workforce expanded by only 2.6%, closely matching the country’s population growth. This modest increase highlights the challenges the sector faces, particularly in job creation outside of research and development (R&D). While R&D positions have grown steadily, employment in business operations and product management has seen a decline.

However, optimism is beginning to return to Israel’s high-tech scene. As of July 2024, nearly 23% of high-tech firms expressed confidence in hiring more workers over the next year, a notable improvement from just 10% in the previous year. This uptick in optimism signals that companies believe the sector may be turning a corner.

Foreign investment continues to play a key role in this recovery. Israel’s venture capital ecosystem has remained stable, with no significant drop in the number of active funds. Notably, foreign investors continue to represent about two-thirds of all venture capital in the country, underscoring the continued global confidence in Israel’s tech potential.

As Israel navigates the challenges of war and economic uncertainty, the high-tech sector remains a beacon of strength and innovation, bolstered by international support and a growing sense of optimism within the industry.

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