Opinion
The global supply chain has fractured – Israeli startups may hold the key to repair
"A series of crises – from COVID-19 to Houthi threats – has shaken the global supply chain. As major corporations shift production back to their home countries, Israeli startups have a rare opportunity to lead the next tech revolution and help restore global supply stability," writes Yoni Heilbronn, founder and MP at IL Ventures.
The crew of the cargo ship Eternity C could hardly believe their eyes – within minutes, their vessel was sunk in broad daylight in the Red Sea by an unmanned boat and RPG missiles, and they were taken captive by Houthi rebels. The next day, another container ship was attacked in the Red Sea – and it too was sunk. Just a few years ago, such a scenario would have sounded completely far-fetched. Yet these two alarming incidents occurred just this past month – and they are not the only ones. Worse still – they are only part of a growing wave of threats to the global supply chain, driving up the costs of production, transport, and logistics.
In recent years, the global supply chain has been severely shaken by a series of crises and events: the COVID-19 pandemic, the war in Ukraine, the Houthi attacks on the maritime route through which approximately 50% of global goods once passed, and the latest disruptive development – the U.S. administration's new tariff policies.
In a world of ongoing instability, global corporations are under pressure to cut risks and are now operating under a new motto: "Closer is Better." In effect, we have shifted from an era of globalization to one of de-globalization and localization. As a result, many major global industrial players are “shortening” their supply chains and bringing critical parts of their production activities back to their countries of origin – parts that, until recently, were based in the Far East. Giants like General Motors, LG, TSMC and others have already announced plans to shift manufacturing from China to the U.S. and other nations.
The challenge of shifting production to Western countries that are not necessarily manufacturing powerhouses like China lies in cost and efficiency – after all, that’s precisely why manufacturing moved to the Far East in the first place. To support the shift back to the West, there’s a clear need for technologies that streamline processes, cut costs, and increase operational efficiency – and this is exactly where Israeli technologies come into play.
The deeper the fracture in the global supply chain, the greater the opportunity for Israeli industry and deep tech solutions, which already hold a strong global reputation. We’re seeing exponential growth in demand for technologies in robotics, digital transformation, fast and data-driven decision-making, energy, and the integration of AI into production and logistics – all of which are poised to lead the industrial world in the coming years.
In these fields, Israel already has a strong presence of companies which are at the forefront of global innovation, answering real and urgent market needs. For example, CaPow, a deep-tech company that significantly reduces costs for factories and logistics centers through wireless charging of robotic fleets; Pickommerce, which streamlines picking and packing processes for retail and logistics centers suffering from severe labor shortages; and Cybord, which developed an AI-powered platform for analyzing electronic components during production - preventing failures, reducing costs, and improving the reliability and traceability of electronic supply chains.
A combination of factors – including exceptional human capital, strong government support, a surge of innovation (particularly focused over the past two years on dual-use technologies), and the relentless entrepreneurial drive of Israeli founders – is fueling breakthroughs and positioning Israel as a global leader in this space. The opportunities for Israeli companies are vast and span the entire global supply chain, logistics, and industrial landscape. This is a massive market in urgent need of innovation – and Israel is clearly leading the way.
Yoni Heilbronn is Founder and Managing Partner at IL Ventures.
