On October 9th, Beijing Time, last Saturday, the Palestinian Islamic Resistance Movement, known as Hamas, suddenly launched thousands of rockets toward Israel, causing at least 250 Israeli casualties on the same day. This marks the deadliest attack Israel has faced since the ‘Day of Atonement War’ 50 years ago and has led to Israel declaring war on Hamas. This war could disrupt Israel’s rapidly growing high-tech industry.
After the attack, Israeli stocks and bond prices declined, and many businesses closed on Sunday. Due to some rockets reaching as far as Tel Aviv, airlines were forced to suspend flights to and from Israel.
01
Middle East Silicon Valley
For decades, the high-tech industry has been the fastest-growing sector in Israel, playing a vital role in the country’s economic growth. The high-tech sector accounts for 14% of employment and nearly one-fifth of the Gross Domestic Product (GDP) in Israel.
Israel’s technology industry can be traced back to 1974 when Intel established operations in the country. However, it wasn’t until the 1990s that Israeli tech startups began to flourish, earning Israel the reputation as the world’s second-largest tech hub outside of Silicon Valley, often referred to as the ‘Middle East’s Silicon Valley.’ The country is home to thousands of tech companies and has cultivated a significant ecosystem.
Today, 500 multinational corporations operate in Israel, primarily establishing research and development centers in the country after acquiring Israeli startups. These include Intel, IBM, Apple, Microsoft, Google, and Facebook.
02
Intel’s Smart Building in Israel
In June of this year, Israeli Prime Minister Benjamin Netanyahu announced that Intel plans to invest $25 billion in building a new factory in the southern city of Kiryat Gat, located approximately 42 kilometers from Gaza. The factory is set to open in 2027 and has been hailed by Netanyahu as the largest-ever international investment in Israel. It is expected to provide employment opportunities for thousands and bolster the country’s chip manufacturing and design capabilities.
However, since the beginning of 2023, the Israeli tech industry has faced the risk of slowing growth, exacerbated by domestic political conflicts and protests. As a result, an increasing number of Israeli tech startups are now choosing to register their businesses in the United States.
03
War Interference Operation
Investors and analysts have expressed concerns that tech companies operating in Israel may face disruptions following the killing of hundreds of Israelis and the kidnapping of an undisclosed number of others by Hamas gunmen. They may need to bolster their security measures.
Jack Ablin, Chief Investment Officer and Founding Partner of Cresset Wealth Advisors stated, ‘This could cause significant disruptions to normal business operations.’ He pointed out that in the short term, if the conflict escalates, resources may be redirected for other purposes, such as tech company employees being called up for military reserve duty.
Quincy Krosby, Chief Global Strategist at LPL Financial in North Carolina, suggested that some companies headquartered in Israel might put in ‘significant effort’ to protect their physical facilities from attacks, as some of these facilities may have military relevance.
04
Giant Response
Intel, a chip manufacturer, is the largest private employer and exporter in Israel. Its spokesperson stated on Sunday that the company is ‘closely monitoring the situation in Israel and taking measures to protect and support our employees.’ The spokesperson did not disclose whether Intel’s chip production has been affected by the conflict.
Tower Semiconductor, headquartered in Israel, has confirmed that its operations are running normally. Tower Semiconductor primarily provides analog and mixed-signal semiconductors for the automotive and consumer industries. Intel had previously attempted a $5.4 billion acquisition of Tower Semiconductor, which ultimately fell through.
As of the time of this response, Apple, Google’s parent company Alphabet, and Meta, the parent company of Facebook, have not issued statements regarding the Israeli-Palestinian conflict. Microsoft has declined to comment.
05
Bounce Back from Tragedy
LPL Financial’s Chief Global Strategist, Crosby, believes that technology and artificial intelligence have consistently been leading sectors in Israel. In the long term, investments in these areas may increase due to their close relationship with Israel’s military expenditure. Essentially, a portion of Israel’s tech investments comes from the military.
“They may increase investments in artificial intelligence,” Crosby stated. “When a nation is under attack, aside from the obvious intelligence needs, their initial focus is on what’s missing in their security systems. The military might receive greater support, funneling more funds into the tech sector, which will eventually transition to private-sector tech companies.”
However, the Israeli tech industry has demonstrated resilience in the face of challenges posed by multiple conflicts between Israel and Hamas in Gaza in the past.
Apjit Walia, Managing Director of tech investment firm DVN Capital, mentioned that the Israeli tech industry has historically been able to rebound from geopolitical tragedies.
Related:
Disclaimer: This article was created by the original author Xiao Yu from PhoenixNet. The content of the article represents their personal opinions. Our reposting is for sharing and discussion purposes only and does not imply our endorsement or agreement. If you have any objections, please contact us through the provided channels.
