produce, research & develop the israeli advantage state of israel ministry of industry, trade...
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Produce, Research & Produce, Research & DevelopDevelop
The Israeli AdvantageThe Israeli Advantage
State of Israel Ministry of Industry, Trade & LaborForeign Trade AdministrationInvestment Promotion Center
Main Indicators 2000-Main Indicators 2000-20042004
20002000200120012002200220032003
InflationInflation (%)(%)0.00.01.41.46.56.5-1.9-1.9
UnemploymentUnemployment (%)(%)
8.8 8.8 9.39.310.310.310.710.7
Imports ($ Imports ($ billion)billion)
35.2 35.2
30.930.932.632.633.733.7
Exports ($ Exports ($ billion)billion)
28.328.327.427.425.825.827.927.9
GDP ($ billions)GDP ($ billions)110.1 110.1
109.5109.5102.7102.7109.1109.1
GDP/Cap ($)GDP/Cap ($)17,581 17,581
17,18017,18015,46815,46816,31216,312
20042004FF
1.11.1
10.210.2
40.540.5
33.733.7
113.7113.7
17,20017,200
Investment climate in IsraelInvestment climate in Israel
Foreign Direct InvestmentForeign Direct Investmentin Israelin Israel
-
1,000
2,000
3,000
4,000
5,000
6,000
91' 92' 93' 94' 95' 96' 97' 98' 99' 00' 01' 02' 03'
millio
ns
US
D
Source:Bank of IsraelNot including traded securities
Investment climate in IsraelInvestment climate in Israel
Sources of Foreign Sources of Foreign Investment -2003Investment -2003
Asia6%
North America49%
Europe27%
Other18%
Source: Israel Venture Association ,
March 2003
Investment climate in IsraelInvestment climate in Israel
Foreign Companies Foreign Companies Invested in Israel- Some Invested in Israel- Some ExamplesExamples
MicrosoftMicrosoft Pratt & WhitneyPratt & Whitney AOL Time WarnerAOL Time Warner IntelIntel IBMIBM Boeing EnterprisesBoeing Enterprises Cisco SystemsCisco Systems GEGE LucentLucent 3Com3Com Hewlett PackardHewlett Packard Merrill LynchMerrill Lynch MotorolaMotorola Sun MicrosystemsSun Microsystems
SiemensSiemens DaimlerChryslerDaimlerChrysler VolvoVolvo Cable & WirelessCable & Wireless BaanBaan VolkswagenVolkswagen Deutsche TelecomDeutsche Telecom L’OrealL’Oreal British TelecomBritish Telecom DanoneDanone Ares SerenoAres Sereno UnileverUnilever
US Europe Asia Samsung ElectronicsSamsung Electronics DaewooDaewoo NomuraNomura Hutchison Telecomm.Hutchison Telecomm. LG GroupLG Group SonySony Toyo InkToyo Ink HyundaiHyundai Acer ComputersAcer Computers Sumitomo TradingSumitomo Trading FujiFuji HondaHonda
Investment climate in IsraelInvestment climate in Israel Supportive Business Supportive Business EnvironmentEnvironment
Worldwide taxation and customs treaties Worldwide taxation and customs treaties Protection of trademarks, patents and Protection of trademarks, patents and
intellectual property of all kindsintellectual property of all kinds Comprehensive legal protection of Comprehensive legal protection of
foreign companiesforeign companies State of the art telecommunicationsState of the art telecommunications A highly advanced banking and financial A highly advanced banking and financial
sectorsector
““The World's Rising The World's Rising Innovation Hot Spots"Innovation Hot Spots"
INDIAINDIA S. KOREAS. KOREATAIWANTAIWANSINGAPORESINGAPOREISRAELISRAELRUSSIARUSSIACHINACHINA
“Israel's strengths: Optical and wireless communications, chips, software, sensors”
BusinessWeek, October 11, 2004
R&D R&D SpendingSpending
1%1% OF GDPOF GDP
1.2%1.2%OF GDPOF GDP
1.2%1.2%OF GDPOF GDP
4.7%4.7%OF GDPOF GDP
2.2%2.2%OF GDPOF GDP
2.3%2.3%OF GDPOF GDP
2.9%2.9%OF GDPOF GDP
U.S U.S PatentsPatents
1993 2003 1993 2003 1993 2003 1993 2003 1993 2003 1993 2003 1993 2003
30 354 60 366 62 268 3061,188
39 438 62
5,300
764
3,952
Innovation climate in IsraelInnovation climate in Israel Scientists & Technicians Scientists & Technicians per 10,000 Workersper 10,000 Workers
140
83 80
60 55 5545 43
33 33 3225
0
20
40
60
80
100
120
140
Innovation climate in IsraelInnovation climate in Israel
Entrepreneurship Entrepreneurship
0
1
2
3
4
5
6
7
8
9
10
Source: IMD World Competitiveness Yearbook, 2002
Innovation climate in IsraelInnovation climate in Israel IMD World Report 2002IMD World Report 2002
Country Rank Country Rank 1st1st22ndnd33rdrd
Quality of basic researchQuality of basic researchUnited United StatesStates
FinlandFinlandIsraelIsrael
Legal environment for technology Legal environment for technology development and applicationdevelopment and application
FinlandFinlandIsraelIsraelSingaporeSingapore
Quality of university educationQuality of university educationIsraelIsraelFinlandFinlandIrelandIreland
Number of outstanding engineersNumber of outstanding engineersIndiaIndiaSlovakiSlovakiaa
IsraelIsrael
University-industry collaborationUniversity-industry collaborationFinlandFinlandIsraelIsraelUnited United StatesStates
Technological tie-ups between Technological tie-ups between companiescompanies
FinlandFinlandSwedenSwedenIsraelIsrael
Source: IMD World Competitiveness Yearbook- 2002 Edition, White Paper on International Trade 2002
Innovation climate in IsraelInnovation climate in Israel Wall Street Journal - 2004 Wall Street Journal - 2004 Technology Innovation Technology Innovation AwardsAwards
GOLD WINNERGOLD WINNERSun Microsystems Sun Microsystems Laboratories Laboratories
U.S.U.S.New method for chips to transmit data inside a New method for chips to transmit data inside a computer up to 100 times faster than today's top computer up to 100 times faster than today's top speed.speed.
SILVER SILVER WINNERWINNER
Given Imaging Ltd.Given Imaging Ltd. IsraelIsraelPill-shaped video camera screens the esophagus for Pill-shaped video camera screens the esophagus for disorders.disorders.
BRONZE BRONZE WINNERWINNER
InSightec Image InSightec Image Guided Treatment Guided Treatment Ltd. Ltd.
IsraelIsraelDevice destroys tumors using ultrasound waves Device destroys tumors using ultrasound waves together with magnetic resonance imaging.together with magnetic resonance imaging.
HONORABLE HONORABLE MENTIONMENTION
Flarion Technologies Flarion Technologies Inc. Inc.
U.S.U.S.New approach to mobile broadband networks, New approach to mobile broadband networks, based on Internet protocol.based on Internet protocol.
HONORABLE HONORABLE MENTIONMENTION
Witten Technologies Witten Technologies Inc. Inc.
U.S.U.S.Technology that creates detailed images of Technology that creates detailed images of conditions underground. conditions underground.
The Wall Street Journal received 585 applications from around the world for the 2004 Technology Innovation Awards.
*
Innovation climate in IsraelInnovation climate in Israel PatentsPatents
Israel - An annual increase of 20% Israel - An annual increase of 20% Source: BDI - Business Data Israel
Number of patents (per 10,000) registered in the U.S. during 2003
2.98 2.96
2.042.02 1.92
1.741.5
0.7 0.68
0
0.5
1
1.5
2
2.5
3
3.5
Japa
n
Taiw
an
israe
lSw
itzer
land
Swed
en
Finla
nd
Ger
man
y
Franc
e
Britai
n
Recent trends and developmentsRecent trends and developments Recent M&ARecent M&A
Israeli Company Technology Acquirer Sum Time
P-CUBE Traffic Management CISCO $200 million August 2004
ENVARA Wireless infrastructure INTEL $40 million March 2004
EMBLAZE Chips for Mobile-device applications
ZORAN $54 million June 2004
ACTONA TECHNOLOGIES
Enterprise software CISCO $100 million June 2004
A2I Content management software
SAP $10 million July 2004
SANCTUME Web security WATCHFIRE $45 million July 2004
Agis Pharmaceutical Perrigo $900 million November 2004
ART Technologies & Phonetic Systems
Speech Applications Scansoft $100 million November 2004
Investment in Investment in TechnologiesTechnologies According to According to
foreign investors, foreign investors, following the following the Silicon Valley and Silicon Valley and Boston, Israel is Boston, Israel is the the main centermain center to search for new to search for new technologies technologies High Tech High Tech Investments Q1-Q3 Investments Q1-Q3 20042004
584
636
502
551
832
861
1,804
7,170
1 10 100 1000 10000
Ernst and Young, October 2004
VC InvestmentsVC Investments (by quarter)(by quarter)
0
100
200
300
400
500
600
$ USD millions
Q2 Q3 Q4 Q12002
Q2 Q3 Q4 Q12003
Q2 Q3 Q4 Q12004
Q2 Q3
Source: IVC Online
Major R&D EffortsMajor R&D EffortsStretching Boundaries of Imagination & IngenuityStretching Boundaries of Imagination & Ingenuity
• Innovative synergistic industry-academy cooperation, supported by the Chief Scientist, Ministry of Industry & Trade.
• Over 100 industrial & academic participants.• Focused on establishment of the technological
infrastructure for the next generation.• Key telecommunications R&D activities:
Digital wireless Satellite systems Broadband & optical technology
Internet & Multimedia Telemedicine Microelectronics Network management
Recently Established Recently Established R&D CentersR&D Centers 18-December-2004 - Telynx (USA) - Data-18-December-2004 - Telynx (USA) - Data-
processing, software and services: Opening of a processing, software and services: Opening of a research and development center in northern Israelresearch and development center in northern Israel
18-December-2004 - BrainStorm (Canada) - 18-December-2004 - BrainStorm (Canada) - Biotechnologies : Announced a new research center Biotechnologies : Announced a new research center in Kiryat Ha'Mada Ve Ha'Technologiain Kiryat Ha'Mada Ve Ha'Technologia
15-November-2004 - Huawei Technologies (China) - 15-November-2004 - Huawei Technologies (China) - Data-processing, software and services : Data-processing, software and services : Establishing $2m Israeli R&D centerEstablishing $2m Israeli R&D center
25-October-2004 - 3M (USA) - Drugs: Minnesota-25-October-2004 - 3M (USA) - Drugs: Minnesota-based giant, 3M, o invest in R&D operations in based giant, 3M, o invest in R&D operations in IsraelIsrael
Source: ANIMA
Technology Start-Technology Start-upsups
Israel is one of the largest world centers Israel is one of the largest world centers for start-up enterprises, with ~800 (year for start-up enterprises, with ~800 (year 2003) active start-ups.2003) active start-ups.
Innovative, technology-intensive activity, Innovative, technology-intensive activity, representing several technology representing several technology breakthroughs.breakthroughs.
Major international activity:Major international activity:– Strategic alliances and joint ventures.Strategic alliances and joint ventures.– Raising capital - venture, seed & risk Raising capital - venture, seed & risk
investments.investments.
Venture CapitalVenture Capital Investments by venture capital funds constitute an Investments by venture capital funds constitute an
added value above financial contributions - in added value above financial contributions - in management, world market familiarity, strategic management, world market familiarity, strategic guidance and economic credibility.guidance and economic credibility.
During 2003, 371 Israeli companies raised $1.01 During 2003, 371 Israeli companies raised $1.01 billion (compared to 352 companies & $1.14 billion billion (compared to 352 companies & $1.14 billion during 2002).during 2002).
43% ($421 million) was invested by Israeli venture 43% ($421 million) was invested by Israeli venture capital funds. capital funds.
The active sectors are communications (33%), The active sectors are communications (33%), software (19%), life sciences (18%), semiconductors software (19%), life sciences (18%), semiconductors (12%) & Internet (4%).(12%) & Internet (4%).
Source: IVC Research Center (2004)
Israeli Revenue-Israeli Revenue-driving Innovationsdriving Innovations
The cellular phone, Motorola IsraelThe cellular phone, Motorola Israel The Pentium MMX Chip technology, the The Pentium MMX Chip technology, the
Pentium-4 microprocessor and the Pentium-4 microprocessor and the Centrino processor, Intel Israel Centrino processor, Intel Israel
Medinol’s minimally-invasive Medinol’s minimally-invasive cardiovascular stent technologycardiovascular stent technology
AOL Instant Messenger technology, ICQ AOL Instant Messenger technology, ICQ
Most of the Windows NT and XP operating Most of the Windows NT and XP operating systems, Microsoft-Israelsystems, Microsoft-Israel
VocalTec’s award-winning voice and VocalTec’s award-winning voice and audio compression technology audio compression technology
Given Imaging’s ingestible video camera Given Imaging’s ingestible video camera AND MANY MORE…AND MANY MORE…
Israeli Revenue-Israeli Revenue-driving Innovationsdriving Innovations
You quest we quote!You quest we quote!
Source for Source for TechnologiesTechnologies
“There are few places like Israel where one can find leading technologies in
almost every field.”Y. Hasson – Senior Vice
President
Nokia Venture Partners (London)
September 2003
You quest we quote!You quest we quote!
The promised landThe promised land
““Land of Tech Promise - Again” Land of Tech Promise - Again” ““After years of a long slump, Israel is After years of a long slump, Israel is
seeing a slew of IPO’s, mergers and seeing a slew of IPO’s, mergers and new startups”new startups”
BusinessWeek, September 20, 2004BusinessWeek, September 20, 2004
You quest we quote!You quest we quote!
Be Part of the FutureBe Part of the Future
““Outside the US, we invest Outside the US, we invest in only one other country. in only one other country.
That’s Israel.” That’s Israel.”
Julien Nguyen, Managing Julien Nguyen, Managing Partner, Partner,
Applied Materials Ventures Applied Materials Ventures September 2003September 2003
You quest we quote! You quest we quote!
Happy InvestorsHappy Investors
““If you liked investing in Israel in If you liked investing in Israel in the late 1990’s, you’ve got to the late 1990’s, you’ve got to
love it today –Same talent. love it today –Same talent. Same opportunity. Better Same opportunity. Better
prices.”prices.”
Stanley Gold, CEO Shamrock HoldingsStanley Gold, CEO Shamrock Holdings
Director of Walt Disney Company, July Director of Walt Disney Company, July 20022002
You quest we quote!You quest we quote!
InnovationInnovation
““Israel is important to our Israel is important to our goal because it has goal because it has historically been a hotbed historically been a hotbed of new raw technology and of new raw technology and scientific developments.”scientific developments.”
Matthew I. Growney, Matthew I. Growney, Managing Managing Director Director Motorola Ventures Motorola Ventures September 2003September 2003
You quest we quote!You quest we quote! Good Things – Good Things – Small PackagesSmall Packages
““Israel is a small country with Israel is a small country with a tiny population, and yet it a tiny population, and yet it has many significant high-has many significant high-tech success stories.” tech success stories.”
Sven Lingjaerarde – Co-Founder & Sven Lingjaerarde – Co-Founder & General PartnerGeneral Partner
Vision Capital – September 2003Vision Capital – September 2003
You quest we quote!You quest we quote! Touched For The Very First Touched For The Very First TimeTime
““I would like to emphasize the fact I would like to emphasize the fact that I feel very safe and very that I feel very safe and very
welcome.”welcome.”
““Israel as safe as NYC”Israel as safe as NYC”
Madonna, a visit to Israel, Sep. 2004 Madonna, a visit to Israel, Sep. 2004
Incentives for R&D Incentives for R&D CentersCenters Tax relief program: “Tax relief program: “Cost Cost
++””
Three priority areas: A, B, Three priority areas: A, B, CC Area CArea C
Center of Center of IsraelIsrael
Area BArea Bpreferred preferred regions of regions of
IsraelIsrael
Area AArea Amost most
preferred preferred regions of regions of
IsraelIsrael
2 years - tax 2 years - tax exemptionexemption
6 years - tax 6 years - tax exemptionexemption
10 years - 10 years - tax tax exemptionexemption
8 years – only 8 years – only 10% taxes10% taxes
4 years – only 4 years – only 10% taxes10% taxes
National Priority Zone A
National Priority Zone B
Central Israel
Grant Benefit PathGrant Benefit Path Fixed asset benefit level pending Fixed asset benefit level pending
zonezone
Tax BenefitTax Benefit
Reduced Company Tax
10 Years Not Applicable
Tax Exemption
Israeli Investors
Foreign Inventors 8 Years
2 Years Not Applicable Not Applicable
5 Years 7 Years Not Applicable
Grant Program Priority Zone A Priority Zone B Priority Zone CCentralIsrael
Industrial Projects(Up to 140M NIS)Industrial Projects(Above 140M NIS)
20% 10% 10%
Priority Zone A Priority Zone BGrant Rates for Fixed
Asset
24% 10% 10%
Central IsraelCentralIsrael
Tax Exemption PathTax Exemption Path
Reduced Company Tax
Tax Program Priority Zone A Priority Zone B Priority Zone C
Tax Exemption 10 Years 6 Years 2 Years
Foreign Inventors Not Applicable 4 Years 8 Years
Israeli Investors Not Applicable 1 Year 5 Years
CentralIsrael
An example of the Tax An example of the Tax BenefitBenefit
0-49% 49-73% 74-89% 90-100%
64
Taxable Income
Company Tax
Balance
Percent of Enterprise owned by Foreign Investors
75 80 85 90
12 13 14
32% 28% 24%
20% 15% 10%
15% 15% 15%
100 100 100
Total Tax on Distributed income 52% 36%
Dividend Tax Percentage 25% 15%
Dividend Tax 16 11
100 100
36% 25%
Tax Benefit Example
Approved EnterpriseNot
Approved Enterprise
Government Support Government Support of R&D Expensesof R&D Expenses
Lower risk: The chief scientist of the Lower risk: The chief scientist of the Ministry of Industry Trade and Labor Ministry of Industry Trade and Labor can share up to 50% of R&D expenses, can share up to 50% of R&D expenses, in exchange to future royalties.in exchange to future royalties.
International Centers International Centers for R&Dfor R&D
About 60 foreign R&D centers are located in Israel
3535
State of IsraelState of Israel Ministry of Industry, Trade & LaborMinistry of Industry, Trade & Labor
Foreign Trade AdministrationForeign Trade Administration
Investment Promotion CenterInvestment Promotion Center
55 Bank Israel St., Kiryat Ben-GurionBank Israel St., Kiryat Ben-Gurion
Jerusalem, IsraelJerusalem, Israel
www.moital.gov.ilwww.moital.gov.il
[email protected]@moital.gov.il