Transcript Research & Development The Israeli Advantage

State of Israel
Ministry of Industry, Trade & Labor - Foreign Trade Administration
Investment Promotion Center
Research & Development
The Israeli Advantage
June, 2005
Main Indicators
2001
2002
2003
2004
2005
Inflation (%)
1.4
6.5
-1.9
1.2
2.4
Unemployment (%)
9.3
10.5
10.9
10.0
9.0
Imports ($ billion)
33.3
33.1
34.2
41.1
44.4
Exports ($ billion)
29.0
29.3
31.8
38.5
36.5
GDP ($ billions)
109.5
102.7
109.1
117.2
123.7
GDP/Cap ($)
17,180
15,468
16,312
17,200
17,848
* May 2005
‫דוגמאות למסרים לקידום ישראל‬
Investment climate in Israel
Foreign Direct Investment in Israel
Millions USD
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
91'
92'
93'
94'
95'
96'
97'
98'
99'
00'
01'
Source: Bank of Israel
02'
03'
04'
05'
(F)
Not including traded securities
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
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
British Telecom
Sap
Philips
Alcatel
Siemens
DaimlerChrysler
Volvo
Cable & Wireless
Deutsche Telekom
Telecom Italia
Generali
L’Oreal
Danone
Unilever
Villmorim
Veolia
Asia
•
•
•
•
•
•
•
•
•
•
•
•
Samsung Electronics
Daewoo
Nomura
Hutchison Telecomm.
LG Group
Sony
Toyo Ink
Hyundai
Acer Computers
Sumitomo Trading
Fuji
Honda
Investment climate in Israel
Foreign Companies Invested in Israel - Some Examples
Fund
USA
Total
Intel Capital
35
Path, Airslide, Appstream, Cash-U, Coresma, CyOptics, Demantra, 3
BlueSoft, ExaNet, Gilian, ,OnSet, PassCall, Phone-Or, RealTimeImage
Identify, InfoCyclone, Jungo, Riverhead, TeraCross, Unicorn, Aduva,
Callixa, CardoNet, Nanolayers, Passave, Atrica, IXI Mobile, Montilio, Wisair
16
Atomica, Cash-U, ClearForest, CTI2, Cyber-Ark, E4X, Gizmoz, Interwise,
Mercado, Narus, NewChannel, Trellis Photonics, Cadent, Gilian, Silverback,
Virtio
15
Path, Appstream, Atomica, Ezchip, Lenslet, Lynx, Sanctum, SmartLight, 3
SpearHead, Tundo, Whale, XOSoft, CeLight
12
DV, Demantra, ESI, ImageID, MCM, Neteos, Neurovision, RadioTel, CMT, 3
X-Technologies
10
Appstream, Enigma, RichFX, ClearForest, ComSense, Gilian, Hotbar,
PowerDsine
9
Atrica, ForeScout, Lycium, TeraChip, Discretix, Flexlight, ItemField, Pontis
9
Mobile Economy, Saifun, Shopping.com, KaVaDo, LocatioNet, Unicorn,
Mellanox, Sphera, Power Paper
9
Atomica, Earthnoise, Exent, Expand Networks, Gizmoz, Shopping.com,
Niragongo, Valis, BigBand
)JP Morgan Partners (JPMP
Goldman
Sachs
Shamrock
Holdings
Deutsche Bank Alex Brown
Accel Partners
Name
Banc of
America Equity Partners
)(BAEP
AOL Time Warner Ventures
Investment climate in Israel
Foreign Companies Invested in Israel - Some Examples
Fund
USA
Total
BancBoston Ventures
Name
9
Allot, Enigma, Millimetrix, Modem Art, Net2gether, Power Paper, Tantian,
Cloverleaf, Virtio
9
Allot, BridgeWave, Expand Networks, Informative, MobileAccess,
Teleknowledge, Whale, PowerDsine, Banter
8
ClearForest, Lynx, Mercado, RADLAN, TdSoft, MobileAccess
8
Personeta, Monosphere, ScaleMP, Skybox, Softier
8
LaserComm, RichFX, Saifun, D-Pharm, Lynx, NextNine
8
Ezchip, Lenslet, Sheer, SpearHead, Tundo, XOSoft, Atrica, Appstream
8
Airslide, CyOptics, Millimetrix, OrAccess, StoreAge, Riverhead
7
Cash-U, Siliquent, Decru, HyperRoll, ClearForest
RBC Dain Rauscher
HarbourVest
Lightspeed
Morgan Stanley Private
Equity
JK&B Capital
.Cisco Systems Inc
Greylock Management
.Corp
Investment climate in Israel
Foreign Companies Invested in Israel - Some Examples
Fund
USA
)Draper Fisher Jurveston (DFJ
.Lucent Venture Partners Inc
)Oxford Bioscience Partners (OBF
Ridgewood Capital
)Global Catalyst Partners (GCP
Carlyle Group
Dell Ventures
Soros Private Equity
Total
Name
6
HarmonyCom, XOSoft, Actelis, IXI Mobile
6
Lambda, Memlink, Kailight, MagniFire, Mobilitec
5
ATI, Predix, PVT, Flowmedica, SuperDimension
5
uTok, Opticalis, Celerica
5
Prompt2U, Radwin
5
Alchemedia, PacketLight, Trellis Photonics, Actelis
5
Sanctum, XaCCT, Mellanox
5
Airslide, CyOptics, Native Networks, Whale, Bandwiz
Investment climate in Israel
Foreign Companies Invested in Israel - Some Examples
Fund
Country
Total
.JAFCO Co. Ltd
Japan
9
Congruency, Creo Israel, Cyota, GlobaLoop, Midbar,
Radwin, TeraChip
China Development Industrial Bank
(CDIB(
Taiwan
8
Celvibe, LocatioNet, Wintegra, Atrica, Lambda,
Mellanox, IXI Mobile, Silverback
.CSK Venture Capital Co. Ltd
Japan
6
Bug-Life, MessageVine, Sphera, VisionTech, ExaNet
Hitachi Corporate Venture Capital Fund
Japan
6
Bug-Life, Sanctum, Pegasus, Voltaire
.Mitsubishi Corp
Japan
5
Appstream, Informative, Phone-Or, PrintLife, Celvibe
Country
Total
Holland
6
NetReality, PassCall, TeleMessage, SigValue
CDB Web Tech
Italy
5
Airslide, MobileAccess, Teleknowledge, Xpert, KereniX
Lewis Trust Group (LTG)
UK
5
Silentium, OrSense, VisionSense
Young Associates Ltd.
UK
5
Lambda, Surf, Atrica, Envara
ASIA
Fund
EUROPE
Holland Venture BV
Name
Name
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"
R&D
Spending
India
China
Russia
Israel
Singapore
Taiwan
S. Korea
1%
1.2%
1.2%
4.7%
2.2%
2.3%
2.9%
OF GDP
OF GDP
OF GDP
OF GDP
OF GDP
OF GDP
OF GDP
5,300
U.S
Patents
30
354
60
1993
2003
1993
366
2003
1,188
62
268
306
1993
2003
1993
39
2003
1993
438
2003
764
62
1993
3,952
2003
1993
2003
“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
140
120
100
83
80
80
60
60
55
55
45
43
33
40
33
32
25
20
0
Israel
US
Japan
Germany
Canada Switzerland Taiwan
UK
Ireland
Italy
Singapore
Spain
Innovation climate in Israel
Entrepreneurship
10
9.11
9
8.42
7.9
8
7.83
7.53
6.9
7
6.77
6.51
6.47
5.83
6
5.16
5.06
4.97
5
3.8
4
3
2
1
0
USA
HK
Israel
Canada Taiwan Australia Ireland
Korea
UK
SingaporeGermany France
Mexico
Japan
Source: IMD World Competitiveness Yearbook, 2002
‫דוגמאות למסרים לקידום ישראל‬
IMD World Report 2004
Country Rank 
1st
2nd
3rd
4th
Total expenditure on R&D as percentage of GDP
ISRAEL
SWEDEN
FINLAND
ILE-DE-FRANCE
Number of mobile telephone subscribers per 1000
inhabitants
ISRAEL
LUXEMBURG
HONG KONG
ITALY
Total public expenditure on education as percentage of
GDP
DENMARK
ISRAEL
CANADA
MALAYSIA
GDP & energy consumption - Real GDP growth minus
energy consumption growth
ZHEJIANG
ISRAEL
MAHARASHTRA
CHINA
University education meets the needs economy
FINLAND
ISRAEL
SINGAPORE
SWITZERLAND
Consumer price inflation - Average annual rate
HONG KONG
ISRAEL
TAIWAN
JAPAN
DENMARK
ICELAND
ISRAEL
AUSTRIA
LUXEMBURG
ILE-DE-FRANCE
ISRAEL
BAVARIA
INDIA
FINLAND
ISRAEL
MAHARASHTRA
ZHEJIANG
HONG KONG
U.S.A.
ISRAEL
SINGAPORE
FINLAND
CANADA
ISRAEL
Skilled labor availability
Total R&D personnel in business per capita, full time work
equivalent (FTE) per 1000 people
Qualified engineers available in labor market
Entrepreneurship of managers
Legal environment affecting R&D does not restrain
business development
Source: IMD World Competitiveness Yearbook- 2004
‫דוגמאות למסרים לקידום ישראל‬
WEF –Competitiveness Report 2004 – 2005
Country Rank 
1st
2nd
3rd
4th
Technological readiness
ISRAEL
U.S.A.
FINLAND
SWEDEN
Availability of mobile or cellular telephones
ISRAEL
NORWAY
ICELAND
HONG KONG
Business costs of irregular payments (all countries hare
the same rank #1)
ISRAEL
DENMARK
ICELAND
HONG KONG
Venture capital availability
U.S.A.
ISRAEL
UK
HONG KONG
Quality of scientific research institutions
U.S.A.
SWEDEN
ISRAEL
FINLAND
Availability of scientists and engineers
INDIA
FINLAND
ISRAEL
JAPAN
Utility patents
U.S.A.
JAPAN
TAIWAN
ISRAEL
WEF – The Global Competitiveness Report 2004 – 2005
Innovation climate in Israel
Wall Street Journal - 2004 Technology Innovation Awards
Gold
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.
Silver
Winner
Given Imaging Ltd.
Israel
Pill-shaped video camera screens
the esophagus for disorders.
Bronze
Winner
ISightenc Image Guided
Treatment Ltd.
Israel
Honorable
Winner
Flarion Technologies
Inc.
U.S.
Honorable
Mention
Witten Technologies Inc.
U.S.
*
Device destroys tumors using
ultrasound waves together with
magnetic resonance imaging.
New approach to mobile
broadband networks, based on
Internet protocol.
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
3.5
2.98
3
2.96
2.5
2.04
2.02
1.92
2
1.74
1.5
1.5
1
0.7
0.68
0.5
0
J
an
p
a
Ta
iw
an
l
ae
r
is
itz
w
S
nd
lr a
e
e
Sw
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de
n
la
n
Fi
d
Ge
y
an
rm
c
an
r
F
e
in
a
t
i
Br
Israel - An annual increase of 20%
Source: BDI - Business Data Israel
Recent trends and developments
Recent M&A
Acquirer
Technology
Israeli Company
Sum $M
Perrigo
Pharmaceutical
Agis
900
11/ 2004
eBay
Internet
620
06/ 2005
Aris
Communications
Shopping.com
Terayon Comm.
Systems Inc.
345
09/ 2005
HP
Printing
Scitex Vision Ltd.
230
08/ 2005
UGS Corp
Software
Traffic
management
Semiconductors
fabless
IT & Enterprise
Software
Tecnomatix
228
04/ 2005
P-CUBE
200
08/ 2004
Modem-Art
150
02/ 2005
Cyota Inc.
145
12/ 2005
CISCO
Agere
Systems
RSA Security
Inc.
Time
Recent trends and developments
Recent M&A
Acquirer
Technology
Israeli Company
Cisco
McKesson
Corp. Life
Sciences
Communications
Sheer Networks Ltd. 122
Medcon
Telemedicine
Technology Ltd.
105
07/ 2005
Oplus Technologies 100
ART Technologies &
Phonetic Systems
100
Siliquent
Technologies Inc.
84
03/ 2005
Intel
Scansoft
Broadcom
Johnson &
Johnson
Ferring
Holding SA
Juniper
Networks
Life
sciences
Processors
for
digital display
devices
Speech
applications
Communications
Sum $M Time
06/ 2005
11/ 2004
07/ 2005
Healthcare
Impulse Dynamics
Biopharmaceutic
al
Savient
80
05/ 2005
80
03/ 2005
Voice over IP
68
03/ 2005
Kagoor
Recent trends and developments
Recent M&A
Acquirer
ZORAN
Kodak
Technology
Chips
for mobile- Israeli Company
device
applications
EMBLAZE
Medical
equipment
OREX Radiography
Alcatel
Communication
West
Pharmaceutica
l Services Inc. Life sciences
Wireless
INTEL
infrastructure
SICK Sensor
Intelligence
Industry
IT & Enterprise
VeriSign
Software
Sum $M Time
54
06/ 2004
51
03/ 2005
50
03/ 2005
42
07/ 2005
ENVARA
40
Netzer Precision
Motion Sensors Ltd. 12
03/ 2004
Snapcentric Ltd.
01/ 2006
Native Networks
Medimop Medical
Projects Ltd.
12
01/ 2006
Investment in Technologies
New York
584
Washington
636
New Jersey
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
502
Georgia
551
Israel
832
Texas
861
Massachusetts
1,804
7,170
California
1
10
100
1000
10000
Ernst and Young, October 2004
Major R&D Efforts
Stretching 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
 Telemedicine
 Broadband & optical technology  Microelectronics
 Internet & Multimedia
 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) - Dataprocessing, 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!
“ Outside the US, we invest in only one
other country. That’s Israel. ”
Julien Nguyen, Managing Partner,
Applied Materials Ventures September 2003
You quest we quote!
“ The level of entrepreneurship and innovation
in Israel is amazing ”
Promod Haque, Managing Partner, Norwest Venture
Partners, November 2004
You quest we quote!
“ To invest in Israel is to profit in the long term ”
Alan Hevesi, New York State Comptroller, October 2004
You quest we quote!
“ Land of Tech Promise - Again ”
“ After years of a long slump,
Israel is seeing a slew of IPO’s,
mergers and new startups
”
BusinessWeek, September 20, 2004
You quest we quote!
“ Israel enjoys the highest concentration of highthech companies in the world, out side of Silicon
Valley
”
Robert Greifeld, President & CEO Nasdaq,
November 2004
You quest we quote!
“ In two days here I saw more opportunities then
I saw in a year in the entire world ”
Paul Smit, Senior Vice President. Philips
Medical, July 2004
You quest we quote!
“ Israel is a small country with a tiny
population, and yet it has many significant
”
high-tech success stories.
Sven Lingjaerarde – Co-Founder & General Partner
Vision Capital – September 2003
Incentives for R&D Centers
Tax relief program: “Cost +”
Three priority areas: A, B, C
Area C
Center of Israel
Area B
preferred regions
of Israel
Area A
most 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
National Priority Zone A
National Priority Zone B
Central Israel
Grant Benefit Path
Fixed asset benefit level pending zone
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
Tax Benefit
Grant Program
Priority Zone A
Priority Zone B
Priority Zone C
Tax Exemption
2 Years
Not Applicable
Not Applicable
Israeli Investors
5 Years
7 Years
Not Applicable
Foreign Inventors
8 Years
10 Years
Not Applicable
Reduced Company Tax
Tax Exemption Path
Tax Program
Priority Zone A
Priority Zone B
Priority Zone C
10 Years
6 Years
2 Years
Israeli Investors
Not Applicable
1 Year
5 Years
Foreign Inventors
Not Applicable
4 Years
8 Years
Tax Exemption
Reduced Company Tax
Tax Benefits Table ( in %)
Tax Benefit Example
Not an
Approved
Enterprise
Approved Enterprise
Percent of Enterprise owned by Foreign Investors
0-49%
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!
State of Israel
Ministry of Industry, Trade & Labor
Foreign Trade Administration
Investment Promotion Center
5 Bank Israel St., Kiryat Ben-Gurion Jerusalem, Israel
www.investinisrael.gov.il
[email protected]
Tel: +972-2-6662607 Fax:+972-2-6662983