Israel Rebuilding Its Struggling Tech Sector

Israel Rebuilding Its Struggling Tech Sector

Israel Rebuilding Its Struggling Tech Sector (Source : Shutterstock)

Israel’s advanced technology sector involving artificial intelligence and security is the pillar of its robust economy. It accounts for 20% of the national GDP and 14% of all jobs. The country’s tech industry is looked upon by the whole world in terms of innovation in the fields of agriculture, defense, artificial intelligence, and education.

The Tel Aviv tech industry is one of the most valuable ones in the world. The $393 billion industry from the Europe-Middle East-Africa (EMEA) region is second to London with $649 billion. In comparison to Asian cities, it is ahead of the $340 billion Singaporean industry but way behind Beijing’s at $1.9 trillion.

The Covid-19 pandemic brought the globe to a standstill, wrecking chaos all over the world; later on, the Russia-Ukraine conflict further worsened the situation along with rising inflation, and every other industry was hit in one or the other way. Israel’s tech industry was no different, even though it took a toll, with further instability to the political mayhem in the country. 


The industry is facing the heat of layoffs. Last week, Google announced that it would fire some people at Waze, an Israeli-founded mapping application. It stated that this is being done as they are integrating the application’s advertising system with Google Ads technology. Alphabet-owned Google acquired Waze back in 2013 for $1.3 billion. It refrained from commenting on the figures of layoffs. 

Amazon cut down multiple jobs by closing the gates of its health bracelet program Halo in Israel. Uber announced halting its operations in Israel. ZipRecruiter, a job posting site, announced that it would downsize by reducing 20% of its current workforce due to unsustainable market conditions.

The government-backed Israel Innovation Authority said that the tech industry slowdown had intensified this year, followed by political turbulence. The report was in correspondence with Prime Minister Benjamin Netanyahu’s surprising return to power during the winter of last year. His far-right government pushed for overhauling the justice system, which caused nationwide protests. The plan was to reduce the powers of the Supreme Court. Tech players had warned that such domestic unrest makes a nation less likely for foreign investment.

Eugene Kandel, the former chairman of Israel’s National Economic Council and professor of economics at the Hebrew University of Jerusalem, said that the slowdown of the tech industry is due to a lot of global factors and some national issues. He added that once the global order settles down, they could see a revival in Israel. 

Investment winter

As per the data from IVC Research Center and LeumiTech, investments in Israeli tech firms reduced by more than 65% in the second quarter from over $5 billion during the same period last year. 

Omer Moav, the former adviser to Netanyahu and the professor of economics at Warwick and Reichman University, said that Israel is facing the worst investment winter in comparison to the other high-tech ecosystem countries. The reason, he states, was the ruling Israeli government and particularly the mayhem caused due to the judicial reforms. He added that Israel’s economy had unlinked itself with the global economy that is showing signs of some recovery since the start of this year. 

This decrease in investments in the high-tech sector of Israel began during the begining of the conflict between Russia and Ukraine in February last year.

Moav stressed some points that are possibly some of the reasons for the slowdown in investment. He pointed out that certain policies, like the Israeli government’s latest judicial remodelling, are barriers to growth and prosperity. A timid judicial institution instills worry in investors regarding their protection of rights. 

He also pointed at the budget that discards investment to fuel growth, like investments for skills and infrastructure and instead works towards anti-growth activities like boosting lesser participation in the labour force of the ultra-orthodox and selecting senior officials for public sector enterprises based on political connections rather than expertise. 

The Israel Innovation Authority reported that the US stock market is on a rebound this year, so an expected spiral effect would be an increase in capital raising and employment in Israel, especially in the high-tech sector. 

However, the stock market tells a different story, the Nasdaq has surged 29%, and on the other hand, Israel’s main tech index has increased only 7.8%. This leads to an urgent need for a long-term strategy with adequate supporting policies to revive the industry in accordance with the global economic trajectory.

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