ICT Clusters in Israel

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ICT Clusters in Israel

• Sept 1, 2004
• Prof Daniel Rouach,
• ESCP-EAP Paris
• European School of Management

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Presentation 1. Israel Valley
2. Five Forces 3.
Cluster Cooperation
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1. Israel Valley
4
Israels Silicon Valley
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Exports in 1991 Israel Total Export 7.7 bn
Exports in 2001 Israel Total Export 20bn
Food
Machinery
4
Food
6
Other
Machinery
Textiles
7
23
8
Other
5
33
Textiles
10
Chemicals
Chemicals
20
High Tech 43
19
High-Tech 22
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Israel High-Tech
The
Success story

• Many Israeli companies listed on NASDAQ
• High-tech sector provides employment

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Nasdaq

Israeli companies on US stock exchanges

• Many Israeli companies listed on NASDAQ,
  European stock exchanges and Tel Aviv stock
  exchange

Tadiran NYSE Tadiran Telecommunications
Ltd. NASDAQ Taro Pharmaceutical NASDAQ Tecnomatix
Technologies Ltd. NASDAQ Tefron
Ltd. NYSE Teledata Communications
Ltd. NASDAQ Teva Pharmaceuticals Industries
Ltd. NASDAQ Top Image Systems Ltd. NASDAQ Tower
Semiconductors Ltd. NASDAQ TTI Team
Telecommunication International Ltd. NASDAQ TVG
Technologies Ltd. NASDAQ VocalTec Communications
Ltd. NASDAQ Wiztec Solutions Ltd. NASDAQ ZAG
Industries NASDAQ Zoran Corp NASDAQ
LanOptics Ltd. NASDAQ Laser Industries
Ltd. NASDAQ Level 8 Systems Inc. NASDAQ Logal
Educational Software NASDAQ M Systems Flash
Ltd. NASDAQ Madge Network NV NASDAQ Magic
Software Enterprises Ltd. NASDAQ Matav Cable
Systems Media Ltd. NASDAQ Mer Telemanagement
Solutions NASDAQ Mercury Interactive
Corp NASDAQ NetManage Inc NASDAQ NeuroMed NASDAQ N
ice Systems Ltd. NASDAQ Orbotech
Ltd. NASDAQ Orckit Communications Ltd. NASDAQ PEC
Israel Economic Corp NYSE Rada Electronic
Industries Ltd. NASDAQ Radcom NASDAQ RIT
Technologies Ltd. NASDAQ Sapiens International
Corp NV NASDAQ ScanVec (1990) Ltd. NASDAQ Scitex
Corp Ltd. NASDAQ Silicom Ltd. NASDAQ Summit
Design Inc NASDAQ Super-Sol Ltd. NYSE
Accent Software International Ltd. NASDAQ AG
Associates Inc. NASDAQ Aladin Knowledge Systems
Ltd. NASDAQ American Israeli Paper Mills
Ltd. AMEX Ampal AM Israel NASDAQ Arel
Communications Software Ltd. NASDAQ Arieli
Advertising Ltd. NASDAQ Arzan International
Ltd. NASDAQ B.O.S Better Online Solutions
Ltd. NASDAQ B.V.R. Technologies
Ltd. NASDAQ Bio-Technology General
Corp NASDAQ Blue Square Israel Ltd. NYSE Carmel
Container Systems Ltd. AMEX Check Point
Software NASDAQ Cimatron Ltd. NASDAQ Data Systems
Software Inc. NASDAQ DSP Communications
Ltd. NASDAQ DSP Group Inc. NASDAQ DSP Technology
Ltd. NASDAQ ECI Telecom Ltd. NASDAQ Edusoft
Ltd. NASDAQ EFI Electronics for Imaging
Inc. NASDAQ Elbit Ltd. NASDAQ Elbit Medical
Imaging Ltd. NASDAQ Elbit Systems Ltd. NASDAQ
Elbit Vision Systems Ltd. NASDAQ Electric Fuel
Corp NASDAQ Electrochemical Industries (1952)
Ltd. AMEX Elron Electronic Industries
Ltd. NASDAQ Eltek Ltd. NASDAQ Elscint
Ltd. NYSE ESC Medical Systems Ltd. NASDAQ Eshed
Robotec (1982) Ltd. NASDAQ Fourth Dimension Soft
Ltd. NASDAQ Galileo Technology NASDAQ Genesis
Devolpment Construction Ltd. NASDAQ Geotek
Communications Ltd. NASDAQ Gilat Satellite
Networks Ltd. NASDAQ Harmonic Lightwaves
Inc. NASDAQ Health Care Technology
Ltd. NASDAQ Home Centers DIY Ltd. NASDAQ I.I.S
Intel Info Systems Ltd. NASDAQ ICTS Holland
International NV NASDAQ IIC Industries
Ltd. NASDAQ Indigo NASDAQ Integrated Technology
USA Inc. AMEX ISG International
Software NASDAQ Israel Land Development Company
Ltd. NASDAQ Isramco Inc. NASDAQ Koor Industries
Ltd. NYSE
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A Permanent Silicon Valley

• .

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2. Five Forces Cluster Formation
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Five Forces Behind Israel Cluster
1. Universities Technion, Weizman Inst.
5. Incubators Technology Transfer
2. Government Support
Israel Cluster
4. Defense Indus.Tsahal
3. Venture Capital
Entrepreneurs Spirit
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(1) University

• 1924 Technion established
• 1925 Hebrew University established
• 1934 Weizmann Institute established
• Applied research in agriculture, medicine and
  beginning of industrial research also started at
  this early stage

Creation of institutionalized bases for
scientific research
Dr. Albert Einstein, on his visit to the
Technion, 1923
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(1) Investment in Education
of GDP
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Ireland
Mexico
OECD Av.
Australia
Spain
USA
Finland
Sweden
Israel
France
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(1) Highly-Skilled Work Force
Israel Scientists and Engineersin Manufacturing
as of all employees
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(1) Skilled Work Force

• Scientists Technicians per 10,000 Workers

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Investment Civilian RD
of GDP
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Ireland
USA
Finland
Japan
France
Germany
Denmark
UK
Israel
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Foreign Investment
Million
5,000
4,000
3,000
2,000
1,000
0
1994
1995
1996
1997
1998
1999
2001
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Global Research Centers
Companies which have established Research Centers
in Israel include

• Microsoft
• IBM
• Cisco Systems
• Motorola
• GE
• Siemens
• Volkswagen
• Intel
• And many, many others

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• Foreign Multinational
  and RD Facilities
• Intel, Microsoft, IBM, Motorola, DEC(COMPAQ),
  Analog Devices, Rockwell, EMC, 3M. ADC Telecom,
  AOL, BAAN, BMC, Broadcom, Cisco, Compaq,
  Conexant, Fujitsu, GE Medical, Intel, Johnson
  Johnson, etc.
• Through investment in Israeli
  companies
• Daimler-Benz, Siemens, America On-line, US
  Robotics, Applied Material, Sumitomo, Boston
  Scientific, 3 COM, JJ, Terayon, Marconi,
  Motorola, Nortel Networks etc.

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(2) Israel Government Focus

• Government policy
• RD support
• Defense Industry
• Technology Education
• Immigrants from former USSR

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(2) Government Actions
1966 - Kachalsky committee recommends that
bureaus of chief scientists be created in
ministries...
1949 - Prime Minister Ben-Gurion headsResearch
Council
which leads to growth of civilian RD in
industry in 70s
Government establishes research laboratories
1960
1970
1950
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(2) Government Push on RD
RD expenditure as of industry sales in Israel

• Chief Scientist Offices supported RD performed
  by industrial firms
• Policy of RD grants as opposed to tax
  concessions which is suitable to small firms
  which dont show a profit yet
• Technical feasibility, honesty, and commercial
  viability are key criteria
• Neutrality and universality of support

Israel understood that the bottleneck to
innovation was RD
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(2) Government / RD Collaboration

• MAGNET collaboration between industrial firms
  and academic research institutes
• Bilateral funding programs with Canada,
  Singapore, Germany
• RD support with Australia, Belgium, France,
  Holland, India, Portugal and Spain
• BIRD stimulates cooperation between Israeli and
  US high-tech companies now earns 6
  million/year from royalties on previous grants

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(3) Five Venture Capital Factor
1. Universities Technion, Weizman Inst.
2. Government Support
Israel Cluster
3. Venture Capital
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(3) Israel Venture Capital

• From 3 Venture Capital funds in 1993 to more than
  100 funds (2002)
• Over 5 billion invested in technology companies
  last 5 years

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(4) Tsahal - Defense Industry Push

• De Gaulle stops all military exports to Israel
  resulting in Israel developing independent
  defense industry
• Israel Aircraft Industries grew from 4000
  employees (1967) to 20,000 (1977) producing the
  Kfir combat plane
• Israeli military production and managerial
  techniques and technologies quickly transferred
  to civil sector
• Lavie jet fighter development cessation unleashes
  great numbers of engineers and scientists to
  civilian sector

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5. Incubation Technology Transfer
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(5) Technology Incubators

• Immigrant entrepreneurs has difficulty getting
  government support due to application and capital
  requirements. Answer Technology Incubator
• Company is in incubator for 2 years and receive
  85 grant up to 370,000
• Incubator receives 20 of equity

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(5) Technions Incubator

• Since its establishment (1991) TEIC has fostered
  61 start-up companies
• Current status
• 9 companies operating within the framework of the
  development period at the incubator
• 33 companies have completed the incubator program
  and are continuing operations
• 19 companies have failed over the last 10 years

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(5) Technions Incubator

• NaviCath Catheterization Systems
• Expandis -Minimal Invasive Orthopedics
• Biota -Tissue Adhesives.
• ModigeneTech Protein Genetic Engineering
• CardioSense -Early-Shock and Dehydration
  Monitoring
• Masor Robotics Surgical Operation Robotics
• Dentosonic Dental Surgery
• UCG Image Processing Algorithm
• Steadicopter Autonomous aerial Vehicles
• CardioWatch Cardiac Function Monitor
• Levram Cardiac Assist Devices
• Cutmed Ophthalmic Surgery
• Satsmart Satellite Modem
• Cellaris Ceramic Foams
• Organitech utomated Growing Produce
• Rimonest HRT and anti-aging

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(5) Incubator Entrepreneurs Profile
Entrepreneurs Education
No Degree (2)
Technician (4)
Bachelors (11)
Doctorate (63)
Masters (21)
Military Program(0)
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(5) Incubator Entrepreneurs Profile
Workplace Where Idea Was Born
Agriculture (3)
Health-Care (11)
Academic or Research Institution (48)
Traditional Industry (23)
Hi-tech Industry (16)
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(5) Incubator Entrepreneurs Profile
Subject Studied
Economics/Management (7)
Software (1)
Exact Sciences (15)
Engineering (40)
Life Sciences/Biology (38)
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3. Cluster Cooperation French - Israel Case
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New Approaches for Increasing France-Israel
Technological Cooperation France /
ISRAEL Key Complementary Study Dr. Daniel
ROUACH Patrice SANTI
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France-Israel Cooperation areas by order of
importance
Sector
Sub-Sector
Smart Card Security Software Biotechnology Wi
reless Medical Instrumentation Other possible
RD
1 2 3 4 5
Data / Network security, Contactless technologies,
Reading Terminals
Internet, Data Transmission and Data Management,
Network Security, Mutimedia, Engineering
softwares
Bio-therapeutic drugs, Diagnostic techno-logies,
Bioinformatics, Bioanotechnologies, Stem Cells,
Proteomics, Pharmacogenomics
Fixed broadband technologies, Multimedia Messaging
, Voice Transmission, Intelligent Antennas
Diagnostic Technologies, Telemedicine, Surgical
Devices, Medical Softwares, Medical Imaging
Opto-electronics, Call Centers, Semi- conductors,
Electronics, ...
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SMART CARD AND SECURITY
We have identified the following opportunities
France-Israel technological niches

• Encryption
• Electronic Signature
• Authentication
• Biometrics
• Contactless
• Reading terminals

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SMART CARD AND SECURITY
Companies interviewed
France
Israël
Kasys
Axiome Technologies
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SMART CARD AND SECURITY
General cooperation agreements anchor point
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SOFTWARE
We have identified the following opportunities
France-Israel technological niches

• Medium Term
• Internet
• Data Management
• Multimedia
• Network Security
• Long term
• Image Processing

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SOFTWARE
Companies interviewed
FRANCE
ISRAEL
Magic Software Enterprises Click Software Aviv
D.I.E.S
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BIOTECHNOLOGY
Companies interviewed
France
Israël
XTL Omrix Origenix Biotechnology
General D-Pharm Mind Sense
IDM
Vivalis
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WIRELESS
Companies interviewed
France
Israël
Optiway
Shiron Satellites Locationnet Algotech
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Ten  Gaps  France-Israel
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Relative France-Israel positionning
According to Hofstede analysis
Risk acceptance Individualism Hierarchy Time
management
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Collaboration between ICT Clusters
Silicon Valley
India
Israel
Taiwan
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Conclusion Israel ICT Success Factors
Creating or Destroying Value ? Ingredients For
Success

• 1 Cross Fertilisation Proximity
• 2 Cooperation /Competition
• 3 Serial Leaders Steff Weirt
• 4 US Eur MNCs Leading Way
• 5 Start-ups Incubation Spirit

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Israel ICT Success Factors Creating or
Destroying Value ? Ingredients For Success

• 6 People Attitude Involvement
• 7 University Industry Synergy
• 8 Tsahal Research High level
• 9 Technology Intelligence
• 10 Experience Curve - Learning by Doing