ISRAEL AT WAR - DAY 140

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Majority of multinational companies operating in Israel see limited impact from war

Survey of dozens of firms shows only 10% report severe consequences from ongoing conflict

Sharon Wrobel is a tech reporter for The Times of Israel.

Right to left: Facebook Israel CEO Adi Soffer Teeni; Cisco CEO Oren Sagi; Karin Eibschitz-Segal, co-CEO of Intel Israel; Microsoft Israel CEO Michal Braverman-Blumenstyk; Philips Israel CEO Lior Bonfis; and high-tech entrepreneur Gigi Levy speak at a panel at the annual IATI conference in Tel Aviv on January 28, 2024. (Gilad Artzi)
Right to left: Facebook Israel CEO Adi Soffer Teeni; Cisco CEO Oren Sagi; Karin Eibschitz-Segal, co-CEO of Intel Israel; Microsoft Israel CEO Michal Braverman-Blumenstyk; Philips Israel CEO Lior Bonfis; and high-tech entrepreneur Gigi Levy speak at a panel at the annual IATI conference in Tel Aviv on January 28, 2024. (Gilad Artzi)

Israel is home to the operations of 430 multinational corporations (MNCs), which are the employers of 86,000 workers, and make up about 18 percent of the country’s high-tech force, according to a new report by Israel Advanced Technology Industries (IATI), an umbrella organization for tech firms operating in Israel. MNCs are defined as global firms that have research and development operations in Israel or own an Israeli tech firm.

The report also included a survey among 60 managers of MNCs who were asked about the war’s impact on their operations. In the poll conducted by accounting firm Ernst & Young, 60% of the surveyed said the war had minimal impact on their business in Israel, 30% responded that the impact was limited, and 10% said that the impact was severe.

The top 10 largest multinational companies — Intel Corp, Nvidia, Google, Microsoft, Hewlett-Packard, Applied Materials, IBM, Philips, Apple — employ 37% of workers, or over 31,000, mainly in areas of R&D, but also manufacturing, and logistics, according to the report presented at the annual IATI forum of CEOs of multinational high-tech companies operating in Israel on Sunday.

Israeli employees working at the top 10 MNCs are based in the north of the country, mainly in offices and R&D centers in Haifa, Kiryat Gat, Yokneam, and Herzliya.

Among the employees working at MNCs in Israel are thousands who were called up on reserve duty, as the Israeli army mobilized more than 350,000 reserve soldiers in the aftermath of the October 7 atrocities perpetrated by the Hamas terror group. The absence of key personnel in the tech sector, the growth engine of the Israeli economy, has damaged startups’ day-to-day operations, as well as their ability to attract foreign investors and raise funding.

The vast majority of MNCs in Israel, with more than 250 employees, are US-based corporations, accounting for 81% of the 430 companies. They are followed by German firms, UK firms, and Chinese firms, the report said.

President Isaac Herzog speaks at the annual IATI forum of CEOs of multinational high-tech companies operating in Israel held in Tel Aviv on January 28, 2024 (Gilad Artzi)

Addressing the CEOs of MNCs at the conference, President Isaac Herzog said: “Returning from the front, removing the uniform, and resuming work, while their memories and perhaps even traumas remain in Gaza, are substantial events and, as such, I call upon you, at every opportunity and at all times, to preserve the rights and standing of those who have been away for three months.”

The conference was attended by the heads of multinational high-tech companies in Israel and senior officials of various government ministries. They included Karin Eibschitz-Segal, co-CEO of Intel Israel; Adi Soffer Teeni, CEO of Facebook Israel; Michal Braverman-Blumenstyk, CEO of Microsoft Israel; Lior Bonfis, president of Philips Israel; and Oren Sagi, CEO of Cisco.

“Looking ahead to 2024, despite the challenging period, part of our essential role, is to be optimistic as some of us impact what will happen in the future, and I allow myself to be optimistic despite the difficulties and despite what we are going through and experience,” said Prof. Yossi Matias, CEO of the Google R&D center in Israel.

“I believe that through further collaboration, partnership, focus on education and research, working through the complexities and, of course, supporting our people — those in reserves too — and by putting in the necessary effort, we will be able to retain our strength, grow and come out of this challenging year even stronger.”

Israel’s tech sector contributes 18% of GDP, versus less than 10% in the US and about 6% in the EU. About 14% of all employees work in the tech sector and in tech jobs in other sectors. The economy relies on tech exports, which make up about 50% of total exports, as well as taxes from the sector.

“There is no doubt that, in terms of Israeli society and in terms of tax issues — high-tech is the locomotive propelling Israel’s economy,” said Israel Tax Authority director Shay Aharonovich. “Without high-tech, we will be unable to establish true security for the State of Israel.”

Also speaking at the conference, Sharon Shulman, CEO of EY Israel, called on the government to recognize MNCs as a strategic asset for Israel, and help them continue to grow and develop in the country “through adjusted taxation, government incentives for expanding strategic operations in fields of national priority and in the periphery, and to create a stable supply chain environment that will enable them to produce in Israel.” That is, as their decision-making is managed from abroad, and the competition against other global hubs is growing.

Intel’s manufacturing plant in Kiryat Gat in southern Israel. (Courtesy)

“During the war, the companies enlisted to help the economy, they took measures and contributed in every possible manner, and management bodies abroad issued clear declarations of support for Israel,” said IATI CEO Karin Mayer Rubinstein. “These measures carry significant weight when attracting foreign investments and emitting a positive signal to the world, facilitating further operations in Israel.”

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