Israeli Tech Growth Abroad Worries Innovation Authority Chairman

Alon Stupel, Chairman of the Innovation Authority, expressed concern over several warning signs in Israel's high-tech sector, despite its demonstrated resilience amidst the war, the tech crisis, and the AI revolution. He noted that a significant portion of the industry's growth is occurring outside of Israel, with more companies relocating employees and operations abroad. Stupel also highlighted insufficient state investment in long-term technological infrastructure and the real "junior crisis" affecting new entrants to the field.

Stupel pointed out that while Israeli high-tech companies are growing, much of this expansion is happening overseas. By 2025, he estimated, the number of high-tech employees in Israeli companies abroad (around 440,000) will surpass those working in Israel (around 425,000). This trend is attributed to Israeli companies becoming more global, with not just sales and marketing but also executive leadership and development centers moving abroad. Factors contributing to this include the rising cost of Israeli tech workers, a weakening dollar against the shekel, and more favorable tax conditions for foreign investors, particularly American ones who prefer Delaware-registered companies.

Another major concern for Stupel is the state's underinvestment in crucial long-term technological infrastructure, such as quantum computing. While countries like China are investing billions, Israel's budget for quantum computing is significantly smaller. Stupel stressed that Israel cannot rely solely on the private sector for technological advancement and that the government must make substantial investments in infrastructure to secure the future of the industry. He also noted that the Innovation Authority's budget has not increased in real terms over two decades, leading to a dramatic decline in its value and impact.

Addressing the "junior crisis," Stupel described it as very real, with graduates struggling to find employment. He called for companies to take responsibility for training the next generation of engineers and managers, emphasizing that the authority's "Launch to High-Tech" program, which provides grants to companies hiring juniors, is only part of the solution. Stupel also discussed government grants totaling 1.6 billion shekels, with 1 billion allocated to mitigate the impact of exchange rates, aimed at helping companies facing cash flow issues.