This is a best prospect industry sector for this country. Includes a market overview and trade data.

Overview
Israel’s information and communication technology (ICT) developments were initially fueled by geo-political needs. Defense-related research and development (R&D) had a significant impact on the start of Israel’s industrial sector, the higher educational system in science and engineering, the research community, and the structure of the ICT industry work force.

The government invested a lot of funding to develop solutions for defense-oriented equipment and capabilities. Demand for highly skilled workers, scientists, and engineers affected public resources allocated to universities and research institutions. However, not all investment in this area stem from the defense sector. Today, multinational companies account for a significant portion of the research spending in the Israeli industry. With more than 300 R&D centers in Israel, American companies constitute about 55% of all R&D centers in the country. Corporations such as Intel, IBM, Google, Cisco, Motorola, Philips, Apple, and many others have invested and set up research centers in Israel to take advantage of the local talent.

Throughout the years, Israel has become an ICT hub for developers in software, data communications, electro-optics, hardware design, and internet technologies, including cybersecurity software. High-technology industries include medical technology, biotechnology, agricultural technology, materials technology, and military technology, all of which use ICT in their final products. There are more than 6,600 startups in Israel's small and connected economy, 14 times the concentration of startups per capita in Europe. And while Israel has just 0.1% of the world's population, the nation attracts 19% of global investment in cybersecurity, ranks number one globally in R&D expenditures per GDP, and attracts the highest rate of venture capital funding per capita in the world — some $674 per capita in 2018, according to a report by Start-Up Nation Central (SNC) and PwC Israel.

ICT Trade Data ($ billion)

 20162017
Total Israeli Exports5.685.08
Total Israeli Imports8.57.75
U.S. Market Share of Imports1.71.3

 

Leading Sub-Sectors
Software
Many of the companies in the ICT ecosystem are software companies. The U.S. is the number one source for Israel’s imports of software and Information Technology (IT) equipment and services, standing at $ 2.03 billion in 2017. 


Israel is considered a vital player in the digital world, especially in IT, software and internet areas, with a market that has increased by almost 400% in  the last decade. Israeli software helps power everything from PC motherboard chips to cell phones and is deployed in business, consumer, and technical applications around the world. More than 100 Israeli software companies are active in cloud computing and the delivery of business and consumer services over the internet, which is considered the next revolution in the IT market.

Israel’s software industry has attracted a great deal of attention from global technology leaders. Many companies, including HP, IBM, Microsoft,  and Oracle, have established operations and manufacturing centers in the country. Additionally, American companies have identified Israel as a prime destination for the establishment of R&D centers. Having an R&D presence in Israel offers an opportunity for the American company to leverage local talent and enhance their exsiting technologies by collaborating with Israeli companies in various software fields.


Semiconductor
Israel has been recognized as a leading player in the semiconductor industry for many years. Currently there are five active semiconductor manufacturing plants (fabs) in Israel, three of which belong to Intel and the other two fabs belonging to Tower/Jazz. The Israeli semiconductor industry has grown to employ over 20,000 people in dozens of companies. Almost all of the world’s leading semiconductor firms have significant R&D centers in Israel, alongside of which a large number of local semiconductor companies have grown. The Israeli semiconductor industry is now one of the most advanced internationally, with the second or third highest concentration of design houses in the world.

There any many multinational semiconductor companies present in Israel, including Freescale Semiconductor, Infineon, Vishay, Zoran, Texas Instruments, IBM, Marvel, SanDisk, Applied Materials, and KLA-Tencor. The U.S. is  the top exporter of semiconductor manufacturing equipment to Israel, and this sub-sector remains a key opportunity for U.S. manufacturers of semiconductor equipment.


Telecommunication
Israel’s telecommunication market is characterized by high mobile penetration and a significant number of service providers such as Bezeq, Bezeq International, Pelephone, HOT Telecom, HOT Mobile, Cellcom, 013 NetVision, Partner, 012 Smile, Golan Telecom, Rami Levi Telecom, and others. Golan Telecom was acquired by a new investor in early 2017, but conditions for the deal included network sharing agreements with Cellcom and Xfone 018. Israel’s telecomunication network is considered to be one of the most sophisticated in the world. It is one of the few countries to have digitalizated telephone network. In the upcoming years,  Israel’s telecommunications network is likely to place an even greater emphasis on mobile rather than fixed phones, with a focus on electronic messages. The use of video-phones has become standard during the next decade, creating more opportunities for American companies in this field to penetrate the Israeli market.


The Ministry of Communication announced that a tender for the fifth generation (5G) celluar will be annouced during 2019, with the intention of launching the adavanced network in 2020. This tender will offer an opportunity for U.S. companies to supply the 5G ecosystem, including mobile chipsets, modems, data center equipment, routers, fiber connectivity, IoT devices and more.

Opportunities
Israeli companies are taking a leading role in developing IT security, cybersecurity solutions, cloud computing, business intelligence, blockchain, virtualization, e-government, and internet applications.  

Growth in the ICT market will rely on a combination of new services and networks. Over the next years, most of the growth in the Israeli telecom market will arise from mobile broadband, VoIP, and pay-tv. As the ability to offer multiplayer services becomes more important in the Israeli market, operators look for mergers or partnerships that will allow them to expand their product range.

Ongoing investments in higher-speed High Speed Packet Access (HSPA) technology are enabling the deployment of a wider range of services. Operators have rolled out 4G services based on Long-term Evolutions (LTE), and Israel is ranked number 50 out of 77 countries who accommodate 4G services, and currently planning on launching 5G in 2020.  The entry of mobile virtual network operators (MVNO) to the mobile sector has created competition and has driven down retail prices for consumers.

The demand for high-bandwidth applications, such as HDVT and growing rates of internet data traffic have contributed to the telecom industry’s most pressing need: bigger pipes. Issues such as network management, providing support for new applications and creating innovative ways to better monetize subscribers and decrease operating expenses are becoming critically important. These challenges provide substantial opportunities for U.S. Companies interested in expanding in Israel’s telecom sector. thriving telecom sector.

For more information please contact Commercial Specialist Christina Azar at Christina.Azar@trade.gov; +972-3-519-8524

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Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Israel Information and Communication Technology Trade Development and Promotion