1. Promoting Israeli High-Tech Industries 2011 - 2012
Ministry of Finance
משרד האוצר
Competitive Advantage National Plan
Promoting Israeli High-Tech Industries

2. ~ Review ~ Summary ~ Appendices ~ The Program Program Highlights
Basic information
Strengths
Weaknesses
~ Appendices
~ The Program
Tool box

3. “Israel related” concept
Program Highlights
“Israel related” concept
No Silver Bullet
Integrated Program
Continuous Process

4. Innovation Centers Start-ups Large companies
High-Tech Industries
Space Industry
Biotechnology
Nanotechnology
Innovation Centers Start-ups Large companies
Life Sciences
Semiconductors
Communications
Security Industries
Software / Hardware
Internet
Clean-Tech

5. Basic Information Israel’s High-Tech industries
41.2% of total exports in 2009
270,000 employees in 2008.
c. 14% of total employees in Israel’s business sector
15% of Israel’s GDP

6. Industry’s Strengths

7. Signs of Weaknesses

8. THERE IS A SIGNIFICANT RISK OF IMPAIRMENT TO THE
CONTINUED GROWTH OF THE INDUSTRY IN ISRAEL

9. ~ Review ~ Summary ~ Appendices ~ The Program Program Highlights
Basic information
Strengths
Weaknesses
~ Appendices
~ The Program
Tool box

10. Tool Box Covers all phases of industry’s growth
Uses a wide variety of additional tools

11. Industry Flow chart

12. Industry and Academic Partnership
The Chief Scientist formulated a set of designated tools to enhance the relationships between Academy & Industry (marketing, financing, business training, etc.)
Supporting basic research that has the potential to be commercialized
Expanding existing programs ("Magneton", "Nofar," etc.)
Tools 1-2 | Industry and Academic Partnership |Israeli scientists abroad

13. Israeli Scientists abroad
The Problem:
Loss of human capital as Israeli scientists move abroad (“brain drain”)
Goal :
To encourage Israeli scientists and entrepreneurs, that have the power to influence and promote the high-tech industries in Israel, to return home to Israel
Solution :
Tax deductions on income from royalties, stemming from research abroad, to scientists who have returned to Israel and commercialized the product 13
Tools 1-2 | Industry and Academic Partnership |Israeli scientists abroad

14. Updating the Chief Scientist’s Programs
Changing the R & D Act regarding the transfer and sale of franchise knowledge
Reducing uncertainty for investors
Improving the effectiveness of the Technological Incubators program
Matching the program to the industry's current characteristics
Changing the loan repayment system of the incubator franchises
Creating incentives to the franchises to reward excellence
Tools 3-4 | Update of Chief Scientist Programs |R&D for the global financial industry

15. Developing R&D Centers for Global Financial Industries
The Problem:
Israeli high-tech is marginal in the global financial industry’s R&D, the biggest consumer of technology worldwide
Solution :
Government incentive to multinational financial entities to establish R&D centers in Israel
Description:
New program under the Chief Scientist Office to encourage R&D centers for global financial technology
Tools 3-4 | Update of Chief Scientist Programs |R&D for the global financial industry

16. Development for Bio-Tech Industry
The Problem:
Over dependence on ICT and a lack of investment and limited knowledge in the bio-tech and Life Science area
Solution:
Significant encouragement for the bio-tech industry in Israel
Description:
4 public-private funds for bio tech. Government’s $104m to be leveraged with a minimum of $304m private funds.
Status:
Status: 4 managers were selected for the funds in April 2010. 16
Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

17. Incentives for Early Stage investments
The Problem:
Not enough money is raised by SEED-stage companies. SEED-stage companies raised approximately $39 million in 2009, a decrease of about 56% compared to 2008.
Solution:
Allowing investment in an R&D-focused company to be reported as an expense on “day one”
Description:
Deducting this investment as an expense against income from all sources, spread over three years
Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

18. Israeli Institutional Investment
The Problem:
There is a dramatic decline in the ability to raise capital in the Venture Capital industry in Israel from local Pension Funds
The percentage of Israeli institutional investors investing domestically is significantly lower than abroad, 0.2% vs. 2%
Solution:
The State will participate in the investment risk of Israeli institutional investors
Status:
The State has a budgetary commitment of about NIS 200 million for this program 18
Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

19. Promoting M&A activity
Encouraging high-tech Israeli companies to acquire small Israeli high-tech companies
Encouraging the creation of clusters
Allowing the amortization of goodwill for tax purposes 19
Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

20. Minorities & Industry The Problem: Solution: Description:
Low rate of Arab minority and Ultra-orthodox employees in the high-tech industries
Solution:
Incentives for high-tech employers to employ underrepresented communities
Description:
Adjusting the Ministry of Industry’s support programs, which subsidize the cost of salaries for the high-tech industry
Examining other options to encourage employment via the Chief Scientist’s programs 20
Tools 6-9 | Encouraging Underrepresented Communities | Dual R&D | CIO | Science / Technology Education

21. Appointment of a Government CIO
The government purchases more than a billion shekels worth of technology and services each year from the high-tech industry
The CIO will see all the needs of the government, set strategy and work to create standardized tools and infrastructure
The CIO will have direct responsibility to initiate, lead and operate all horizontal projects for the government
The CIO will create a supportive environment to promote innovation in Israeli industry 21
Tools 6-9 | Encouraging Underrepresented Communities | Dual R&D | CIO | Science / Technology Education

22. Strengthening Technological Education
Structured combination of high-tech industry retirees /young people
Retraining program by the Ministry of Education for teaching technological subjects
Shortage of teachers in technological education
Industry
Ministry of Finance
Ministry of Education 22
Tools 6-9 | Encouraging Underrepresented Communities | Dual R&D | CIO | Science / Technology Education

23. Governmental Focus on R & D
Clean-Tech?
Homeland
Security ?
Bio-Tech?
תעדוף
The Problem:
No preference or system for integrated national R&D efforts
The Solution:
a body responsible for: recommendations for research focus areas, formulating an action plan and coordinating between governmental bodies
Members of the Body: various government bodies that are in charge of investment in research and development 23
Tools | Bringing Back Israeli Scientists | Governmental Focus on R&D

24. ~ Review ~ Summary ~ Appendices ~ The Program Program Highlights
High-tech Industries
Strengths
Signs of Weakness
~ Appendices
~ The Program
Tool box

26. THANK YOU

27. ~ Review ~ Summary ~ Appendices ~ The Program Program Highlights
High-tech Industries
Strengths
Signs of Weakness
~ Appendices
~ The Program
Tool box

28. Exports of High-Tech Industries as a % of Exports In 2009, the share of exports of high-tech industries in Israel was 41.2%
Emerging markets
Developed economies

29. Export of High-tech Industries Average Growth Rate 2004 - 2006
Developed countries
Emerging markets
Source: EuroStat, CBS. 29 29 29

30. High-Tech Employees by Sub-Branches 2008, thousands
85%
15%
Source: Central Bureau of Statistics, Manpower Survey

31. Innovative Patents Registered by Emerging Markets in the U.S. in 2008
(Patents per million people)
Source: USPTO. 31 31 31

32. U.S. Patent Applications by Country of Source 200832 32

33. University Degrees by Field of Study 1987-2008
Source: CBS.

34. Israeli Requests for Patents in the U.S.
From

35. Students Studying Abroad Vs. Students Studying Domestically, 2002-2007
Source: OECD - education at glance.

36. Israeli Students in the U. S. After Receiving a Ph. D
Israeli Students in the U.S. After Receiving a Ph.D. (% Staying and Returning)
*לפי תוכניותיהם בשנה לאחר קבלת התואר

37. Forecast in Venture Capital Investment Activity in 2010
הסקר בוצע בתאריכים 30 בנובמבר – 8 בדצמבר 2009, בקרב 325 קרנות הון סיכון ברחבי ארה"ב.
יש לזכור שמרבית קרנות ההון סיכון בישראל אינן קרנות ישראליות.
Source: NVCA. 37 37 37

38. Failure of Large Company Development
Large companies Over employees >$100 M
1% companies
25% employees 5
9% companies
30% employees
Growth companies Sales >$10 M
90% companies
45% employees
“Start-Ups”
According to CBS:
There are 36 companies with sales greater than $100M
There are 12 companies which were established after 1992
4 companies were established after 1995
Source: IVC. 38

39. Expenditure on IT by Sector
הסקר בוצע בתאריכים 30 בנובמבר – 8 בדצמבר 2009, בקרב 325 קרנות הון סיכון ברחבי ארה"ב.
יש לזכור שמרבית קרנות ההון סיכון בישראל אינן קרנות ישראליות.
Source: Gartner. 39 39 39

40. THANK YOU