The local high-tech industry is one of the biggest success stories in Israel’s 60 years of existence. Senior economist Yaakov Sheinin estimates that the sector is responsible for 9% of the per capita gross domestic product.

The computer industry has actually always been with us, since the days when it was called data processing and calculations were performed using punch cards. Nevertheless, it is only in the past three decades that Israel has really become a high-tech nation.

Here are a few facts to demonstrate the contribution and power of the Israeli high-tech engine: The high-tech industry is responsible for 48% of all of Israel’s industrial exports, which totaled about $32 billion in 2007. The industry employs between 100,000 and 200,000 workers, and Israel ranks number one in the world in the number of engineers per capita (according to Export Institute figures).

The development of the Israeli high-tech industry was catalyzed by a number of influences. The main catalyst was the defense industry and technological know-how developed in the IDF. Deserving mention in this reference is the IDF’s Mamram unit, the army’s elite computer unit founded in 1959, from which innumerable key high-tech workers migrated into the private market.

In addition to the Mamram unit, there is Rafael and the Intelligence Corps technology units, which served as fertile incubators for a multitude of start-up companies established beginning in the 1990s. The defense industries and the IDF developed communication, semiconductor, data security and software technology, all of which commanded a central position in the industry after being demobilized.

In the 1980s more and more high-tech workers began working outside of Israel, mainly in the United States, where they acquired rich experience that formed the basis of their work here.

Soon after, large technology companies began to recognize the potential of the “Jewish mind” and starting filling Israel with research and development centers. Dov Fuhrman, for instance, persuaded Intel leaders to establish a center in Haifa in 1974. Now there is no global company that does not have some sort of R&D operation in the country. Google, Microsoft, Motorola, IBM and EMC are just a few examples. Israel is also the top investor in research and development spending per GDP in the world.

And we can’t discuss research and development without a mention of the technology incubators project, which assists technology entrepreneurs to establish companies and access generous state financing. The state took a brave step forward in 1993 when it established the Yozma plan, in effect seeding an entire local venture capital industry. Years later, these funds were the fuel that powered the startup industry that sprouted here. The great wave of immigration from the former Soviet Union in the 1990s also provided Israel with a large community of engineers and technology specialists of a particularly high standard. Combined with the process of globalization and Israel’s increasingly strong financial standing in the world market, these have provided the Israeli high-tech industry with a strong tail wind.

This story is by:

Guy Grimland