1 Elisha Yanay- Senior VP Motorola Inc General Manager Motorola Israel Chairman of the Board Israel Association of Electronics & Information Industries 20th February 2007 The Israel Telecom Industry The Computing & Electronic Industry in Israel

2 Israel Population: 6.9 M Households: 1.8 M Urban Population: 91.5% Area - grand total 22,145 sq. km GDP: US $ ~124.0 B GDP Per Capita: US $ ~18.0 K Fixed line Telephone Subs – 3.2M Mobile – 7.18M (104% penetration) Internet Users: 2.5M (ADSL: 1.5M)

3 World Economic Growth Solid… Real GDP Growth (Year-Over-Year % Change) Israel

4 ISRAEL ELECTRONICS & SOFTWARE INDUSTRIES SALES & EXPORT (M$) 2010 $32B

$32B

6 ISRAEL ELECTRONICS & INFORMATION INDUSTRIES ,700 M$ ISRAEL ELECTRONICS & INFORMATION INDUSTRIES ,700 M$ Civilian Comm. & Telecomm. Components Industrial Equipment 22.9% 13.4% 17.8% 13.4% Defense Systems 23.7% Software 8.8 % Medical Systems

7 Fiberoptic & Photonic Systems SDH, SONET Access – XDSL, IAD ATM, Frame Relay IP Networks – Voice, Video, Data, Multimedia Routers, Load balancing Test Equipment, Quality Monitoring of Networks 3G Applications Home Networks Storage Area Networks Wireless Local Loop, Microwave VPN, Firewalls Video-Compression, Video-Conferencing & Video Networks TELECOMMUNICATIONS EQUIPMENT 23%

8 Missiles and Guided Weapons Anti Aircraft and Anti-Missiles Systems Radars - Airborne, Naval, Ground EW Equipment Fire Control Systems Command, Control, Communications and Intelligence Systems Avionic Equipment Platforms (Aircraft, Tanks…) Retrofit and Upgrading Navigation and Positioning Equipment Tactical Airborne, Naval and Ground Communications Sights and Night Vision Simulation and Training Equipment MAJOR MILITARY SYSTEMS 13.7%

9 Computerized Production Equipment Computerized Control Systems Test Equipment Training and Education Systems Consumer Products Security Equipment MAJOR INDUSTRIAL EQUIPMENT 13..4%

10 Imaging and Diagnostic Equipment Surgical and Treatment Equipment Monitoring Systems MAJOR MEDICAL EQUIPMENT 8,8 %

11 SEMICONDUCTORS Design Centers Manufacturing Facilities PASSIVE COMPONENTS Resistors & Networks Capacitors Transformers Batteries P.C. Boards ACTIVE COMPONENTS Tubes Power Supplies Oscillators Detectors Microelectronic Components Microwave Components ELECTRONIC COMPONENTS 13,4 %

12 INTERNET MULTIMEDIA SOFTWARE – PRODUCTS SOFTWARE – TURNKEY PROJECTS SOFTWARE - SUBCONTRACTING SOFTWARE 23.7%

13 ISRAEL ELECTRONICS & INFORMATION INDUSTRIES ,700 M$ ISRAEL ELECTRONICS & INFORMATION INDUSTRIES ,700 M$ 36% USA 39% 5%5% 20% EUROPE ROW ASIA

14 Technology adoption curve Faster and faster adoption curve Sources: IEC Resources, Gartner, NetRatings, Scarborough Group Number of years US percentage of ownership Telephone Electricity Radio PC TV Cell Phone Internet

15 Digital Hot Dog Yes ! Everything is Digital

16 The Broadband Revolution

17 Business Week Oct * Total annual new bachelor’s degree or higher Israel R&D in first place with 4.7% of GDP

18 Scientists & Engineers per 10,000 pp

19 Israel Macro Economic Indicators % B % 222 8,9% % 23B 38% % 17,5 12% = Advanced Technology 100% 221 B 100% 3,2 M 100% 2,5 M 100% 115 B 100% 60 B $ $

20 $11B 2003 $2,7T $5,4T 2010 We have the human resources necessary $32B X2 X2 ?? The new challenge to 2010

21 The Israel Telecom Industry Telecom Equipment from A to Z

22 Access

23 Datacom/IT

24 Metro & Backbone

25 Cellular Core Network

26 Cellular Handheld Components

27 Cellular Internet Applications

28 Cellular Applications

29 HIGHER EDUCATION IN ISRAEL ELECTRICAL & COMPUTER ENGINEERING & COMPUTER SCIENCES ,200 46%54%

30 Foreign Investements in Israel 2006 Expected to reach $20Bn

31 Foreign investment growth Foreign investment $Bn *Jan-Sep 2006 at annual rate Q3

32 Acquired CompanyAcquiring CompanyMonthTransaction in $MPayment Iskar Lipman Passave Kashya Identify Sightline Alma Predix Whale Med Impuls Eldat Aduba Mercury M-Systems* XOsoft nLayers Mobilitec Gteko XMPie PowerDesign * Brekshier (Warren Buffett) VeriFone PMC EMC BMC Striker Investment fund TA EPIX Microsoft AMS Pricer Sun Microsystems HP SanDisk CA EMC Lucent Microsoft Xerox Microsemi May April May March April May January April February July June September October Oct 4, M Cash Cash + Stock Stock Cash Cash + Stock Cash Stock Cash Terms of transaction not disclosed Financial terms of transaction are not being disclosed Cash Cash + Stock Foreign Investment in Israel in total $12Bn * Not Final

33 Foreign Investment in Israel ,000$M 800$M 300$M 150$M 140$M 90$M 4,500$M 1,500$M

34 Foreign Investment in Israel $M 76$M Med Impuls 50$M 40$M 12$M

35 245$M 54$M 100$M 75$M Foreign Investment in Israel $M

36 FOREIGN ELECTRONIC SUBSIDIARIES IN ISRAEL (PARTIAL LIST) FOREIGN ELECTRONIC SUBSIDIARIES IN ISRAEL (PARTIAL LIST) Intel Microsoft IBM Sun Microsystems Cisco 3 Com HP Texas Instruments National S.C ST Microelectronics Infineon Analog Devices Vishay AVX (Kyocera) General Electric Philips Medical Motorola Lucent Technologies Avaya Nortel Siemens Alcatel Philips Ericsson Nokia ADC Qualcomm Applied Materials KLA - Tencor Kulicke & Soffa BAE Systems Ind. Astronautics

37 Asked how come he chose Israel as his first investment outside America, Buffett's response was: "Some Americans came looking for oil, so they didn't stop in Israel. We came looking for brains, so we did stop in Israel."

38 CRAIG BART: former Intel CEO ( visiting Israel ) “Apart from the 6,000 jobs that we have provided here, in my opinion the contribution to Israel lies in the fact that Intel has attracted other companies to invest in Israel and to create an entrepreneurial environment. Globally speaking, Israel is in 3rd place in terms of IP and is a very good place for opening businesses. The level of education in Israel has helped us expand. Israel’s ability to supply very good scientists has helped us, and the government’s positive attitude has helped us attract investments.”

39 CEO Ed Zander visit to Israel -----Original Message----- From: Zander Ed-AEZ111 Sent: Sunday, November 14, :57 PM To: Yanay Elisha-BCMS54; Nottenburg Richard-arn021 Cc: Brown Greg-CGB025 Subject: RE: Your visit to Israel Elisha- I had a great time. You and your team did an outstanding job. I was continually impressed by their knowledge of the business, opportunities and issues and great work ethic. Motorola has a jewel in it it's Israeli operation thanks to you and your senior team. Hope to see you soon. Regards, ed

40 Bill Gates, the Microsoft CEO, made his first trek to Israel “Considering the density of Israeli start-ups and local successes, Israel is like a bit of Silicon Valley.

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42 What do we need to continue our success? Excel in our education – aspire to being the best in the world Keep raising the bar in education Teach innovation and creativity Strengthen partnerships between academia and industry Support sophisticated, small ( $M) industries – if you want to be large, gather together many small… Government support should match or even exceed other countries’ incentive plans Keep pushing!

43 Great talent driving Israel ’s success

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