TCS Daily

Israel's Tech Boom

By Allan A. Guldberg - June 30, 2005 12:00 AM

The last decade of the 20th Century was a period of hope and optimism for the citizens of Israel. The Oslo peace process was still on track and this tiny Mediterranean nation was at the absolute forefront of the burgeoning information technology boom.

The beginning of the 21st Century, however, saw both the peace process and the first stage of the IT-economy go bust, and this consequently sent Israel into a tailspin.


Slowly but surely, things are picking up again thanks to several factors. The much criticized building of the security barrier seems to be giving ordinary people a better sense of safety, as well making tourists comfortable enough to start trickling back in. More interestingly, Finance Minister Binyamin Netanyahu has implemented a series of reforms aimed at the earlier collectivist Israeli economy. Plenty of screaming and shouting has accompanied the reforms, and the Histadrut, the general Labor Federation, has imposed a series of strikes -- including one two years ago that nearly paralyzed the country for two months (I was, in fact, a victim of the strike thanks to an inability to renew my expired visa). Business interests are happy, though, even though they resent Netanyahu for his stint as the prime minister. In Israel, the economy is at the bottom of the list of important political issues, which explains why secular business elites tend to vote for leftist parties.


Most importantly however, is that many movers and shakers abroad have not forgotten the R&D potential that this country holds. For example, Israelis made it possible for Motorola to revolutionize the portable phone world, and for Intel to develop the Centrino computer chip technology. And many of the program codes for the Windows operating system were developed at Microsofts research facilities here.


Our improving economic atmosphere does mean that investors are looking to start exploiting those proven industries again. Venture capitalists are reporting that foreign investment is flooding back in again. Riding the crest of that wave is nanotechnology.


In recognition of this, the government has agreed to invest almost $30 million to build a new nanotech research facility at Haifas Technion University. The university has agreed to invest almost $30 million of its own into nanotechnology as well. In addition, a private donor has matched this commitment. In all, the university will have $88 million as an investment in new technology.  


What is in the pipeline for the future?


Sadly, much of the new technology research and development is security driven. For instance, all telephone calls to the New York and Los Angeles police departments are now monitored by technology developed in Israel. Magal, the company that constructed the security barrier, is also now being tapped to create state-of-the-art security systems around the world. Additionally, the Israeli company Alvarion makes the hardware that is used for WiMAX and WiFI hot spots. Another, AudioCodes, provides the algorithms that make it possible for phone conversations to travel the over the internet. All of these products have security industry based applications worldwide.


And this is only the beginning. At Intels Israeli facility they are working on technology that will completely integrate mobile phones, the internet, body diagnostics, memory books, and home-based electronic equipment into a device the size of an earring. This device will be accessible everywhere, and will make the 3G phones look like caveman technology.


Another company is working on new technology that will eventually make it possible to produce more effective personality profiles from the sound of a persons voice. The inventor, Dr. Yoram Levanon, is also taking out a patent on a system that can identify disorders such as dyslexia or autism by voice analysis. He even sees a use in his technology for online dating sites.


Israel, a nation that is unfortunately always in the news for tragic reasons, should actually be in the news for having the most NASDAQ listed companies outside of the US and Canada, and a hot technology sector with significant government and educational investment. The future is happening here, and that, rather than the security situation is definitely worth watching.


Alan A Guldberg is a Danish writer living in Tel-Aviv. He is a fellow of the Markedscentret Think Tank in Denmark, as well as the Jerusalem Institute for Market Studies.


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