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Research & Development
The Israeli AdvantageResearch & Development
The Israeli Advantage
State of Israel Ministry of Industry, Trade & Labor - Foreign Trade Administration
Investment Promotion Center
June, 2005
Main Indicators
Inflation (%)
Unemployment (%)
Imports ($ billion)
Exports ($ billion)
GDP ($ billions)
GDP/Cap ($)
2005
2.4
9.0
44.4
36.5
123.7
17,848
2001
1.4
9.3
33.3
29.0
109.5
17,180
2002
6.5
10.5
33.1
29.3
102.7
15,468
2003
-1.9
10.9
34.2
31.8
109.1
16,312
2004
1.2
10.0
41.1
38.5
117.2
17,200
* May 2005
Investment climate in Israel
Foreign Direct Investment in Israel
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
91' 92' 93' 94' 95' 96' 97' 98' 99' 00' 01' 02' 03' 04' 05'(F)
Source: Bank of Israel Not including traded securities
Millions USD
ישראל לקידום למסרים דוגמאות
Investment climate in Israel
Capital Raised by Israeli High-Tech Companies
Foreign Companies Invested in Israel- Some Examples
US
• Microsoft• Pratt & Whitney• AOL Time Warner• Intel• IBM• Boeing Enterprises• Cisco Systems• GE• Lucent• 3Com• Hewlett Packard• Merrill Lynch• Motorola• Sun Microsystems
Europe Asia
• Samsung Electronics• Daewoo• Nomura• Hutchison Telecomm.• LG Group• Sony• Toyo Ink• Hyundai• Acer Computers• Sumitomo Trading• Fuji• Honda
• British Telecom• Sap• Philips• Alcatel • Siemens• DaimlerChrysler• Volvo• Cable & Wireless• Deutsche Telekom• Telecom Italia• Generali• L’Oreal• Danone• Unilever• Villmorim• Veolia
Investment climate in Israel
Foreign Companies Invested in Israel - Some Examples
USA
FundTotalName
Intel Capital
35
3Path, Airslide, Appstream, Cash-U, Coresma, CyOptics, Demantra, OnSet, PassCall, Phone-Or, RealTimeImage, BlueSoft, ExaNet, Gilian, Identify, InfoCyclone, Jungo, Riverhead, TeraCross, Unicorn, Aduva, Callixa, CardoNet, Nanolayers, Passave, Atrica, IXI Mobile, Montilio, Wisair
JP Morgan Partners (JPMP)
16Atomica, Cash-U, ClearForest, CTI2, Cyber-Ark, E4X, Gizmoz, Interwise, Mercado, Narus, NewChannel, Trellis Photonics, Cadent, Gilian, Silverback, Virtio
Goldman15
3Path, Appstream, Atomica, Ezchip, Lenslet, Lynx, Sanctum, SmartLight, SpearHead, Tundo, Whale, XOSoft, CeLight Sachs
Shamrock12
3DV, Demantra, ESI, ImageID, MCM, Neteos, Neurovision, RadioTel, CMT, X-Technologies Holdings
Deutsche Bank Alex Brown10
Appstream, Enigma, RichFX, ClearForest, ComSense, Gilian, Hotbar, PowerDsine
Accel Partners9Atrica, ForeScout, Lycium, TeraChip, Discretix, Flexlight, ItemField, Pontis
Banc of
9Mobile Economy, Saifun, Shopping.com, KaVaDo, LocatioNet, Unicorn, Mellanox, Sphera, Power Paper America Equity Partners
(BAEP)
AOL Time Warner Ventures9
Atomica, Earthnoise, Exent, Expand Networks, Gizmoz, Shopping.com, Niragongo, Valis, BigBand
FundTotalName
BancBoston Ventures9
Allot, Enigma, Millimetrix, Modem Art, Net2gether, Power Paper, Tantian, Cloverleaf, Virtio
RBC Dain Rauscher
9Allot, BridgeWave, Expand Networks, Informative, MobileAccess, Teleknowledge, Whale, PowerDsine, Banter
HarbourVest8ClearForest, Lynx, Mercado, RADLAN, TdSoft, MobileAccess
Lightspeed8Personeta, Monosphere, ScaleMP, Skybox, Softier
Morgan Stanley Private Equity8LaserComm, RichFX, Saifun, D-Pharm, Lynx, NextNine
JK&B Capital8Ezchip, Lenslet, Sheer, SpearHead, Tundo, XOSoft, Atrica, Appstream
Cisco Systems Inc.8Airslide, CyOptics, Millimetrix, OrAccess, StoreAge, Riverhead
Greylock Management Corp.7Cash-U, Siliquent, Decru, HyperRoll, ClearForest
Investment climate in Israel
Foreign Companies Invested in Israel - Some Examples
USA
Investment climate in Israel
Foreign Companies Invested in Israel - Some Examples
USAFundTotalName
Draper Fisher Jurveston (DFJ)6HarmonyCom, XOSoft, Actelis, IXI Mobile
Lucent Venture Partners Inc.6Lambda, Memlink, Kailight, MagniFire, Mobilitec
Oxford Bioscience Partners (OBF)5ATI, Predix, PVT, Flowmedica, SuperDimension
Ridgewood Capital5uTok, Opticalis, Celerica
Global Catalyst Partners (GCP)5Prompt2U, Radwin
Carlyle Group5Alchemedia, PacketLight, Trellis Photonics, Actelis
Dell Ventures5Sanctum, XaCCT, Mellanox
Soros Private Equity 5Airslide, CyOptics, Native Networks, Whale, Bandwiz
FundCountryTotalName
JAFCO Co. Ltd.Japan9Congruency, Creo Israel, Cyota, GlobaLoop, Midbar, Radwin, TeraChip
China Development Industrial Bank (CDIB(
Taiwan8Celvibe, LocatioNet, Wintegra, Atrica, Lambda, Mellanox, IXI Mobile, Silverback
CSK Venture Capital Co. Ltd.Japan6Bug-Life, MessageVine, Sphera, VisionTech, ExaNet
Hitachi Corporate Venture Capital FundJapan6Bug-Life, Sanctum, Pegasus, Voltaire
Mitsubishi Corp.Japan5Appstream, Informative, Phone-Or, PrintLife, Celvibe
Investment climate in Israel
Foreign Companies Invested in Israel - Some Examples
ASIA
FundCountryTotalName
Holland Venture BVHolland6NetReality, PassCall, TeleMessage, SigValue
CDB Web TechItaly5Airslide, MobileAccess, Teleknowledge, Xpert, KereniX
Lewis Trust Group (LTG)UK5Silentium, OrSense, VisionSense
Young Associates Ltd.UK5Lambda, Surf, Atrica, Envara
EUROPE
Investment climate in Israel
Supportive Business Environment
Worldwide taxation and customs treaties
Protection of trademarks, patents and intellectual property of all kinds
Comprehensive legal protection of foreign companies
State of the art telecommunications
A highly advanced banking and financial sector
“The World's Rising Innovation Hot Spots"
India China Russia Israel Singapore Taiwan S. Korea
R&D Spending
U.S Patents
1% OF GDP
1.2%OF GDP
1.2%OF GDP
4.7%OF GDP
2.2%OF GDP
2.3%OF GDP
2.9%OF GDP
1993 20031993 20031993 20031993 20031993 20031993 20031993 2003
3,952
764
5,300
6243839
1,18830626862
3666035430
“Israel's strengths: Optical and wireless communications, chips, software, sensors”
BusinessWeek, October 11, 2004
Innovation climate in Israel Scientists & Technicians per 10,000 Workers
140
83 80
6055 55
45 43
33 33 3225
0
20
40
60
80
100
120
140
Israel US Japan Germany Canada Switzerland Taiwan UK Ireland Italy Singapore Spain
Innovation climate in Israel
Entrepreneurship
9.11
8.427.9 7.83
7.536.9 6.77
6.51 6.475.83
5.16 5.06 4.97
3.8
0
1
2
3
4
5
6
7
8
9
10
USA HK Israel Canada Taiwan Australia Ireland Korea UK SingaporeGermany France Mexico Japan
Source: IMD World Competitiveness Yearbook, 2002
IMD World Report 2004
Country Rank 1st
Source: IMD World Competitiveness Yearbook- 2004
Total expenditure on R&D as percentage of GDPISRAELSWEDENFINLANDILE-DE-FRANCE
Number of mobile telephone subscribers per 1000 inhabitants
ISRAELLUXEMBURGHONG KONGITALY
Total public expenditure on education as percentage of GDP
DENMARKISRAELCANADAMALAYSIA
GDP & energy consumption - Real GDP growth minus energy consumption growth
ZHEJIANGISRAELMAHARASHTRACHINA
University education meets the needs economyFINLANDISRAELSINGAPORESWITZERLAND
Consumer price inflation - Average annual rateHONG KONGISRAELTAIWANJAPAN
Skilled labor availabilityDENMARKICELANDISRAELAUSTRIA
Total R&D personnel in business per capita, full time work equivalent (FTE) per 1000 people
LUXEMBURGILE-DE-FRANCEISRAELBAVARIA
Qualified engineers available in labor marketINDIAFINLANDISRAELMAHARASHTRA
Entrepreneurship of managersZHEJIANGHONG KONGU.S.A.ISRAEL
Legal environment affecting R&D does not restrain business development
SINGAPOREFINLANDCANADAISRAEL
4th2nd 3rd
ישראל לקידום למסרים דוגמאות
WEF –Competitiveness Report 2004 – 2005
Country Rank 1st 4th2nd 3rd
Technological readinessISRAELU.S.A.FINLANDSWEDEN
Availability of mobile or cellular telephonesISRAELNORWAYICELANDHONG KONG
Business costs of irregular payments (all countries hare the same rank #1)
ISRAELDENMARKICELANDHONG KONG
Venture capital availabilityU.S.A.ISRAELUKHONG KONG
Quality of scientific research institutionsU.S.A.SWEDENISRAELFINLAND
Availability of scientists and engineersINDIAFINLANDISRAELJAPAN
Utility patentsU.S.A.JAPANTAIWANISRAEL
ישראל לקידום למסרים דוגמאות
WEF – The Global Competitiveness Report 2004 – 2005
Innovation climate in Israel Wall Street Journal - 2004 Technology Innovation Awards
Gold
Winner
Silver Winner
Sun Microsystems Laboratories U.S.
New method for chips to transmit data inside a computer up to 100 times faster than today's top speed.
Given Imaging Ltd. Israel Pill-shaped video camera screens the esophagus for disorders.
Bronze Winner
ISightenc Image Guided Treatment Ltd.
IsraelDevice destroys tumors using ultrasound waves together with magnetic resonance imaging.
Honorable Winner
Flarion Technologies Inc.
U.S.New approach to mobile broadband networks, based on Internet protocol.
Honorable Mention
Witten Technologies Inc. U.S. Technology that creates detailed images of conditions underground.
* The Wall Street Journal received 585 applications from around the world for the 2004 Technology Innovation Awards.
Innovation climate in Israel
Patents
Number of patents (per 10,000) registered in the U.S. during 2003
Source: BDI - Business Data Israel
2.98 2.96
2.04 2.02 1.921.74
1.5
0.7 0.68
0
0.5
1
1.5
2
2.5
3
3.5
Israel - An annual increase of 20%
Recent trends and developments Recent M&A
Acquirer Technology Israeli Company Sum $M Time
Perrigo Pharmaceutical Agis 900 11/ 2004
eBay Internet Shopping.com 620 06/ 2005
Aris CommunicationsTerayon Comm. Systems Inc. 345 09/ 2005
HP Printing Scitex Vision Ltd. 230 08/ 2005
UGS Corp Software Tecnomatix 228 04/ 2005
CISCOTraffic management P-CUBE 200 08/ 2004
Agere Systems
Semiconductors fabless Modem-Art 150 02/ 2005
RSA Security Inc.
IT & Enterprise Software Cyota Inc. 145 12/ 2005
Recent trends and developments Recent M&A
Acquirer Technology Israeli Company Sum $M Time
Cisco Communications Sheer Networks Ltd. 122 07/ 2005McKesson Corp. Life Sciences Life sciences
Medcon Telemedicine Technology Ltd. 105 06/ 2005
Intel
Processors for digital display devices Oplus Technologies 100 03/ 2005
ScansoftSpeech applications
ART Technologies & Phonetic Systems 100 11/ 2004
Broadcom CommunicationsSiliquent Technologies Inc. 84 07/ 2005
Johnson & Johnson Healthcare Impulse Dynamics 80 05/ 2005Ferring Holding SA
Biopharmaceutical Savient 80 03/ 2005
Juniper Networks Voice over IP Kagoor 68 03/ 2005
Recent trends and developments Recent M&A
Acquirer Technology Israeli Company Sum $M Time
ZORAN
Chips for mobile-device applications EMBLAZE 54 06/ 2004
KodakMedical equipment OREX Radiography 51 03/ 2005
Alcatel Communication Native Networks 50 03/ 2005West Pharmaceutical Services Inc. Life sciences
Medimop Medical Projects Ltd. 42 07/ 2005
INTELWireless infrastructure ENVARA 40 03/ 2004
SICK Sensor Intelligence Industry
Netzer Precision Motion Sensors Ltd. 12 01/ 2006
VeriSignIT & Enterprise Software Snapcentric Ltd. 12 01/ 2006
Investment in Technologies
584
636
502
551
832
861
1,804
7,170
1 10 100 1000 10000
California
Massachusetts
Texas
Israel
Georgia
New Jersey
Washington
New York
Ernst and Young, October 2004
According to foreign investors, following the Silicon Valley and Boston, Israel is the main center to search for new technologies High Tech Investments Q1-Q3 2004
Major R&D EffortsStretching 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 R&D Centers
18-December-2004 - Telynx (USA) - Data-processing, software and services: Opening of a research and development center in northern Israel
18-December-2004 - BrainStorm (Canada) - Biotechnologies : Announced a new research center in Kiryat Ha'Mada Ve Ha'Technologia
15-November-2004 - Huawei Technologies (China) - Data-processing, software and services : Establishing $2m Israeli R&D center
25-October-2004 - 3M (USA) - Drugs: Minnesota-based giant, 3M, o invest in R&D operations in Israel
Source: ANIMA
Technology Start-ups
Israel is one of the largest world centers for start-up enterprises, with ~800 (year 2003) active start-ups.
Innovative, technology-intensive activity, representing several technology breakthroughs.
Major international activity:
Strategic alliances and joint ventures.
Raising capital - venture, seed & risk investments.
Venture Capital
Investments by venture capital funds constitute an added value above financial contributions - in management, world market familiarity, strategic guidance and economic credibility.
Capital raised by Israeli VCs Surges to $724m in 2004
Capital available for investment now at $1 billion
$1.5 billion projected to be raised by VCs in 2005
Source: IVC Research Center (2004)
Israeli Revenue-driving Innovations
The cellular phone, Motorola Israel
The Pentium MMX Chip technology, the Pentium-4 microprocessor and the Centrino processor, Intel Israel
Medinol’s minimally-invasive cardiovascular stent technology
AOL Instant Messenger technology, ICQ
Israeli Revenue-driving Innovations
Most of the Windows NT and XP operating systems, Microsoft-Israel
VocalTec’s award-winning voice and audio compression technology
Given Imaging’s ingestible video camera
AND MANY MORE…
You quest we quote!
Julien Nguyen, Managing Partner,
Applied Materials Ventures September 2003
Outside the US, we invest in only one other
country. That’s Israel.
“”
You quest we quote!
Promod Haque, Managing Partner, Norwest Venture Partners, November 2004
The level of entrepreneurship and innovation in Israel is amazing
“”
You quest we quote!
Alan Hevesi, New York State Comptroller, October 2004
“ ”To invest in Israel is to profit in the long term
You quest we quote!
After years of a long slump,
Israel is seeing a slew of IPO’s,
mergers and new startups
BusinessWeek, September 20, 2004
“ ”Land of Tech Promise - Again
“
”
You quest we quote!
Robert Greifeld, President & CEO Nasdaq, November 2004
Israel enjoys the highest concentration of high-thech
companies in the world, out side of Silicon Valley
“
”
You quest we quote!
Paul Smit, Senior Vice President. Philips Medical, July 2004
In two days here I saw more opportunities then I saw in a
year in the entire world
“”
You quest we quote!
Sven Lingjaerarde – Co-Founder & General Partner
Vision Capital – September 2003
Israel is a small country with a tiny
population, and yet it has many significant
high-tech success stories.
“
”
Incentives for R&D Centers
National Priority Zone A
National Priority Zone B
Central Israel
Tax relief program: “Cost +”
Three priority areas: A, B, C
Area CCenter of Israel
Area Bpreferred regions
of Israel
Area Amost preferred
regions of Israel
2 years - tax exemption
6 years - tax exemption
10 years - tax exemption
8 years – only 10% taxes
4 years – only 10% taxes
Grant Program Priority Zone A Priority Zone B Priority Zone C
Tax Exemption 2 Years Not Applicable Not Applicable
Reduced Company Tax
Israeli Investors 5 Years 7 Years Not Applicable
Foreign Inventors 8 Years 10 Years Not Applicable
Grant Benefit Path
Grant Rates for Fixed Asset
Priority Zone A Priority Zone B Central Israel
Industrial Projects (Up to 140M NIS) 24% 10%
Industrial Projects (Above 140M NIS) 20% 10% Not Applicable
Fixed asset benefit level pending zone
Tax Benefit
Tax Exemption Path
Tax Program Priority Zone A Priority Zone B Priority Zone C
Tax Exemption 10 Years 6 Years 2 Years
Reduced Company Tax
Israeli Investors Not Applicable 1 Year 5 Years
Foreign Inventors Not Applicable 4 Years 8 Years
Tax Benefits Table ( in %)
Tax Benefit ExampleNot an
Approved Enterprise
Approved EnterprisePercent of Enterprise owned by Foreign
Investors0-49% 49-74% 74-90% 90-100%
Taxable Income 100 100 100 100 100
Company Tax 34 25 20 15 10%
Balance 66 75 80 85 90
Dividend Tax Percentage 25 25 20 15 10
Dividend Tax 16.5 11.25 12 12.75 13.5
Total Tax on Distributed income
50.5 36.25 32 27.75 23.5
Government Support of R&D Expenses
The Chief Scientist of the Ministry of Industry, Trade and Labor offers conditional R&D grants of up to 50% of approved R&D programs. If successful the developers are obligated to pay back royalties, up to the amount of the grant.
International Centers for R&D
About 60 foreign R&D centers are located in Israel
AND MORE…
Thank You!Thank You!
State of Israel State of Israel
5 Bank Israel St., Kiryat Ben-Gurion Jerusalem, Israelwww.investinisrael.gov.il [email protected]
Tel: +972-2-6662607 Fax:+972-2-6662983
Ministry of Industry, Trade & LaborForeign Trade Administration
Investment Promotion Center