Opinion
Israeli high-tech is strong, but how much of it will remain in Israel?
"The most important question for the future of Israeli high-tech is not how many Israeli entrepreneurs and companies will succeed around the world," writes Adv. Karin Mayer Rubinstein, CEO and President of the Israel Advanced Technology Industries Association (IATI). "It's how many of them will choose to continue building that success from here?"
There is something very dangerous about success: it can make us think it is guaranteed.
Israeli high-tech is still the main growth engine of the economy. In 2025, it accounted for 18.3% of Israel’s GDP, was responsible for approximately 58% of exports, and contributed about half of the economy’s growth. High-tech output reached approximately NIS 352 billion, and Israel ranked as the fourth-largest technology fundraising hub in the world and the largest outside the United States.
These figures carry even greater significance when taking into account the reality in which the industry has operated over the past three years. A prolonged war, security and economic uncertainty, large-scale reserve duty call-ups, and a challenging global environment — and despite all of these, Israeli high-tech continued to raise capital, export, grow, and produce companies and technologies with global impact. The resilience demonstrated by the industry during this period is a testament to the strength of the Israeli ecosystem and its ability to cope even under extreme conditions.
These are exceptional figures. But especially now, we must not confuse them with a guarantee for the future.
But beneath the strong macroeconomic figures, significant changes are taking place that should concern anyone responsible for the future of the Israeli economy and the high-tech industry: the center of gravity of part of the industry is beginning to shift abroad.
In January 2019, 69% of employees at privately held Israeli high-tech companies were employed in Israel. By March 2026, that figure had fallen to just 62%. At the same time, most of the growth in employment by those companies outside Israel is taking place in the United States, not only in sales and marketing, but also in R&D and senior management. In 2025, for the first time in more than a decade, a decline was recorded in the number of R&D employees in Israeli high-tech.
The place where Israeli companies choose to incorporate and register is also changing. In surveys conducted by IATI among the leading law firms that work with the high-tech industry, of 460 new startups examined in 2025, 45% chose to incorporate outside Israel. In 2022, that figure stood at just 20%.
An additional in-depth analysis that examined approximately 30 significant Seed investments of more than $20 million over the past three years found that more than 85% of the companies examined incorporated as American companies, even though they were founded by Israeli entrepreneurs. This is a focused sample of companies that raised large Seed rounds and not of the industry as a whole, but it provides another indication of the direction in which some young companies are heading.
It must be said honestly: the trend of Israeli companies incorporating abroad is a concerning one, but it is also important to understand the business reality behind it. Global activity is a prerequisite for the success of Israeli companies, their main markets are around the world, and the United States is a key target market for many of them. The problem is not global activity itself, but the risk that companies’ center of gravity will gradually shift from Israel abroad.
The problem begins when, along with incorporation, intellectual property, R&D, management, and decision-making centers also gradually move. If this trend continues, Israel may find itself in a situation in which it continues to produce excellent entrepreneurs and ideas, but a growing share of the economic value they create is built elsewhere.
We cannot ask an entrepreneur to choose Israel out of Zionism when the business conditions point in another direction. The role of the government and the state is to ensure that the right business decision is to establish the company here, develop it from here, and keep as significant a share as possible of the value it creates in Israel.
Added to this is another challenge that has become particularly significant recently: the strengthening of the shekel against the dollar. For an industry whose activity is largely directed toward global markets, the exchange rate has a direct impact. Exports account for approximately 79% of Israeli high-tech output, and therefore companies that generate revenue in dollars but pay a significant share of their expenses — first and foremost employee salaries — in shekels, see their costs in Israel become more expensive in dollar terms. The Israel Innovation Authority illustrated the scale of the impact: the decline from an average dollar exchange rate of NIS 3.70 in 2024 to NIS 3.45 in 2025 translates, in an illustrative calculation, into a decline of approximately NIS 21 billion in high-tech output in shekel terms.
This is not merely a question of short-term profitability. A strong shekel shortens the runway of startups that raised their funding in dollars, increases the cost of employment in Israel relative to alternatives abroad, and may become another factor in deciding where to expand teams and operations. When we are already identifying a movement of employees, management teams, and R&D outside Israel, the exchange rate must not be treated merely as a financial issue. It is becoming part of the competition over where Israeli companies will choose to grow.
And this becomes even more urgent in the age of artificial intelligence.
Israel’s AI Test
Artificial intelligence is no longer just another sector within the high-tech industry. It is changing the way companies develop products, recruit employees, and compete with one another, and in the coming years it will also change the balance of power among the world’s technology hubs.
Here too, Israel has an excellent starting point, but a starting point is not a strategy.
The change is already reaching the labor market. In a survey conducted by the Israel Innovation Authority in June 2026 among 210 companies employing a combined total of approximately 130,000 employees, the share of companies reporting that they had reduced hiring following the implementation of AI rose from approximately 3% to approximately 10% within about six months. Among companies planning layoffs, half reported that AI had an impact on the decision, compared with 29% in the previous survey. While overall employment in the industry has remained relatively stable at this stage, this stability itself is also a concerning sign: between 2014 and 2022, the high-tech workforce grew at an average annual rate of approximately 7%. In an industry accustomed to consistent and rapid workforce growth, a halt in growth is not really stability — it is a change in trend that should raise a red flag. Therefore, the question is not whether AI will “replace employees.” That is far too simplistic a question. The real question is which employees, skills, and companies will be needed five and ten years from now, and whether Israel is preparing for that today.
Israel’s advantage has always rested on exceptional human capital. In the age of AI, this advantage, too, cannot be taken for granted.
Israel cannot compete with the United States or China in the scale of investment. It can and must compete in the quality of research, the speed at which knowledge moves from academia to industry, specialization in fields where it has a relative advantage, access to computing infrastructure, and its ability to attract and retain the best people here.
Anyone who assumes that the reputation of the Startup Nation will be enough to secure Israel’s place in the AI revolution may discover that the world has moved forward while we settled for the achievements of the past.
The state must compete for Its high-tech industry
Countries today compete for entrepreneurs, researchers, investors, intellectual property, and development centers. Israel must approach this competition with the same seriousness with which a business approaches competition for its customers.
First and foremost, this means creating certainty. Entrepreneurs and investors making decisions for the next decade need to know what the tax, regulatory, and incentive environment in which they operate will look like.
The government bears the responsibility of building an orderly work plan for the coming decade and creating a real advantage for companies that choose to keep intellectual property, R&D, and management in Israel; strengthening incentives for investment at the Seed and Early Stage phases; ensuring that companies, researchers, and academia have access to advanced computing infrastructure; and establishing a broad national track for training and reskilling workers for the AI era.
We must also reconsider how we measure success.
An exit by an Israeli company is an achievement, but it cannot be the only measure. We must measure how many new companies choose to incorporate in Israel, what share of their employees is employed here, where their executives are based, where their R&D is conducted, where their intellectual property is held, and how much of the value they generate flows back into the Israeli economy.
This is not a call for isolation. Quite the opposite. Israeli high-tech must be global. But there is an enormous difference between an Israeli company becoming global and a company that started in Israel and gradually ceases to be Israeli in terms of its center of gravity.
The data still do not tell the story of an industry in crisis. On the contrary: they tell the story of one of the strongest and most resilient industries in the world. But within this success, warning signs are already emerging that must not be ignored.
Over decades, Israel has built an ecosystem that other countries are trying to emulate. We have entrepreneurs, researchers, investors, multinational companies, excellent universities, and a proven ability to turn an idea into technology that changes markets around the world.
But no competitive advantage sustains itself.
The most important question for the future of Israeli high-tech is not how many Israeli female and male entrepreneurs, and how many Israeli companies, will succeed around the world. I have no doubt that they will continue to succeed.
The question is how many of them will choose to continue building that success from here.
Adv. Karin Mayer Rubinstein is CEO and President of the Israel Advanced Technology Industries Association (IATI).
