Israeli High-Tech Sector Shows Stability Amid Layoff Reports, Hardware Firms Thrive

A comprehensive survey by the Israel Innovation Authority and Tzaviran reveals that despite widespread reports of layoffs, the Israeli high-tech sector remains stable overall. Conducted among 210 companies employing around 130,000 workers, the study found that in the first half of 2026, hiring rates averaged 8% while layoffs were only 2.8%, with voluntary departures at 4.3%, resulting in a nearly unchanged employment level. These findings align with data from the Central Bureau of Statistics indicating a 7% employment growth in high-tech during the first quarter and approximately 18,000 open positions.

Beneath the surface, the sector is undergoing a significant structural shift. Software companies experienced the heaviest cuts, with layoffs at 6.6%, more than double the sector average, while hardware firms showed remarkable stability with only 1.1% layoffs. Pharmaceutical and medical technology companies had moderate layoffs at 2.7%. This divergence is largely attributed to the differing impacts of the AI revolution: software firms face competitive pressures and rapid efficiency drives, whereas hardware and deep-tech sectors (including chips, computing infrastructure, and defense technologies) benefit from peak demand.

Dror Bin, CEO of the Israel Innovation Authority, explained that the sector is not shrinking but evolving, with changing skill demands driving workforce turnover. He emphasized the importance of continued investment in R&D, human capital, and deep-tech to maintain Israel's innovation leadership in the AI era. Contrary to fears, only 7% of companies cited AI as the primary cause of layoffs, though AI's influence on hiring decisions has increased, with companies reducing recruitment due to AI rising from 3% to 10% within six months.

Mid-sized companies employing 50 to 200 people were hit hardest, with an 8.7% layoff rate, over three times the sector average. These firms face greater financial pressures, currency fluctuations, and rising employment costs. Among companies conducting broad layoffs, 17.6% linked cuts directly to exchange rate issues, and 28% attributed hiring slowdowns to currency volatility.

Looking ahead, over one-third of high-tech employers expect reduced hiring in the second half of 2026, nearly double the previous survey's figure. The average hiring target dropped from 7.2% to 5.9%, while planned layoffs among companies preparing cuts rose to 6.4%. The Innovation Authority notes these are employer plans, not definitive forecasts, but they signal a cautious outlook for the sector's near future.