how Israel became one of the centers of global IT
glory california
Silicon Valley
back in the 70s, it captivated many minds outside the United States. It was under the influence of the success of companies and developers from cities south of San Francisco that the “silicon valleys” of the Beijing region were born.
Zhongguancun
and South Indian city
Bangalore
. They both claim to be the “major Silicon Valley of Asia.” But besides them, there is another serious contender for this title. We are talking about the “silicon wadi” (ואדי סיליקון), also known as the “Israeli silicon valley”.
Strictly speaking, the Israeli IT hub is not a wadi. Wadis in the Middle East are called beds of dried-up rivers and temporary streams, filled with water only in heavy rains. Naturally, Israeli developers do not sit in any wadi, it would be uncomfortable and periodically wet. The term was taken to distinguish it from the canonical “valley” with a regional flavor.
Moreover, it is difficult to call even a “silicon wadi” valley. The California, Beijing and Karnataka “valleys” at least represent relatively unified territorial areas. Their Israeli “colleague” is more like an archipelago, tied to the agglomerations of the largest coastal cities, Tel Aviv and Haifa, as well as the city of Rehovot south of Tel Aviv and some neighborhoods of Jerusalem.
The California “silicon valley” is to this day an undeniable and unsurpassed center of the global IT industry, ahead of all other contenders in key indicators at times, and somewhere by orders of magnitude. The Chinese “valley” in the northwestern regions of the capital of the PRC is focused primarily on the colossal, but peculiar domestic Chinese market, closed from the politically unreliable global network by the “golden shield” (aka the “great Chinese firewall”). However, projects of a truly global scale are already emerging from it – primarily TikTok. The Indian “valley” in the southern and eastern suburbs of Bangalore, in addition to working with the huge and growing market of the Indian Internet, specializes in global outsourcing, largely working “on the hook” from California and other “valleys”.
The specialization of the “silicon wadi” – operating not in half a billion China or India, but in nine million Israel – was the full support of IT start-ups and the production of innovative solutions: to a large extent for the transnational “mastodons” of the information industry from all the same California, as well as the EU countries . By the summer of 2022, 11 “unicorn” companies worked here: there are more on the planet only in the most important IT centers in the USA, China and India, as well as in London, Paris and Berlin. The number of technology start-ups is in the thousands thanks to a purposefully formed favorable environment: the IT sector is considered one of the priorities in the economic development of Israel.
Unlike the Chinese and Indian “valleys”, founded in the 70s and 80s under the influence of the success of California companies, the history of the Israeli “silicon wadi” began simultaneously with the “original” one, in the 1960s. The first companies specializing in telecommunications technology and electronics appeared in Israel in the early 1960s: they were ECI Telecom, Tadiran Ltd., and especially Elron. The latter, still one of the pillars of the Israeli electronics and IT industry, has become one of the most important actors in Israel’s success in the field of electronics, computer and IT development.
Elron is often referred to as Israel’s first and most important high-tech start-up. Its creator Ouzia Galil, was a native of Bucharest, who managed to escape from the outbreak of world war and genocide in British Mandatory Palestine. He graduated from the Technion in Haifa, the main technical university in Israel – and then the American Purdue University in Indiana, where he was sent to study as an electrical engineer from the Israel Defense Forces. In the same place, in the USA, he gained useful experience in manufacturing at Motorola.
Returning to Israel, Uziya Galil combined his passion for civilian telecommunications technologies with a service in the navy, where he was engaged in the development of military communications, including as head of the department for the development of electronic equipment of the navy. After the service and on weekends, he and like-minded friends were preparing to create their own private company in the field of electronics and telecommunications. In the 57th, Uziya went to the “citizen” and became the head of the department of electronics at the Faculty of Physics of the Technion.
Well, in the 62nd in Haifa, a company was finally born
. The first developments and products were such gadgets as a device for counting red blood cells, and … equipment for nuclear research. Namely: the Mössbauer spectroscope, a radiometer and other instruments for research in the field of peaceful and not very atom. There was nothing surprising in this: just in the 60s, with the support of France, Israel built a nuclear reactor in Dimona. Thanks to which he created an officially non-existent, but, according to almost all experts, a very solid military nuclear potential: the “final argument” of a small and pressed to the sea country, surrounded by extremely unfriendly, numerous and warlike neighbors.
Since at first the project was secret even for the United States, friendly to the Israelis, and relations with France were deteriorating rapidly in the 60s, the country needed its own instruments and technologies for nuclear development like air. Not surprisingly, Uzia Galil’s start-up, which is very useful for the national nuclear program, has reached an annual income of about a million US dollars in just three years. However, the company’s management thought strategically, and was by no means limited to working in the interests of the military nuclear program – investing more and more money in electronics.
Further more. Right on the eve of the Six Day War, when Israel launched a devastating preemptive strike against the armies of Egypt, Syria and Jordan deployed to invade, France declared a very severe embargo on the Israelis, especially on military and related goods and technologies. The experience of wars with Arab countries has already shown the Israelis the importance of a technological advantage – since the Israelis could only counter the multiple numerical superiority of Arab opponents with qualitative superiority. And by the end of the 60s, it became clear that the qualitative military-technological superiority was increasingly based on superiority in electronics and computer systems. Already not only at the stage of development and related calculations, but more and more often in the “built-in” in military equipment and ammunition.
Since experience clearly demonstrated to the Israelis that everything is difficult in a tense Middle East policy with permanent allies, and rapprochement with the United States instead of France could also be interrupted quickly and dangerously, it was decided to rely on the development of their own electronic industry. Well, due to the military-political situation in the form of neighbors eager for revenge, who buy colossal amounts of military equipment and weapons from the USSR, Israeli developments in the field of high technologies have become clearly near-military in nature, including in the increasingly relevant computer field.
One of the main beneficiaries of the new situation was Elbit Computers, founded in 1966 as a joint venture between the already familiar Elron Electronic Industries and the Israeli Ministry of Defense. Within the framework of “import substitution”, the achievements and experience of specialized research institutes and research centers of the Israeli Ministry of Defense, including in the field of special computer design, were combined with Elron’s experience in the development, production and management of electronic products. A year later, the first Israeli-designed microcomputer called Elbit-100.
In the following years, Elbit rapidly and very successfully expanded the development and production of complex electronic systems for aircraft and armored vehicles of the Israel Defense Forces: increasingly advanced microcomputers, navigation and fire control systems, color multifunction displays and much more. More and more new companies joined Elbit, mastering the current niche and military orders. By the beginning of the 80s, Israel was already known as one of the world’s leading developers and manufacturers of advanced military electronics, comparable in quality and sophistication only to American and the best Western European ones.
The first organized IT cluster in Israel was the Matam High-Tech Park in Haifa. Matam is an abbreviation in Hebrew (מתם) from “merkaz taasiyot mada” (מדע תעשיות מרכז), that is, literally, “scientific and industrial center”. In 1974, shortly after the difficult but successful Yom Kippur War for Israel, which strengthened Israel’s ties with the United States, it received its first American resident: Intel’s R&D center. Other, still young and ambitious, Californian Silicon Valley companies followed him – Matam at the southern entrance to Haifa remains, perhaps, the most important center of the Israeli IT industry to this day.
Successes and experience in high-tech military developments – if there is a market economy and there are no all-consuming secrecy regimes – are very well converted into commercially successful civilian products, goods and services. Serious efforts to create national military electronics have led to the emergence in Israel of a noticeable number of strong specialists in relevant technologies – including those with experience working for corporations of Americans friendly to the country.
In the 80s, many of them, including as the military threat from neighbors decreased and gaining obvious military-technological superiority over them (suffice it to recall how the Israeli Air Force, equipped with advanced electronic systems, almost without loss demolished the powerful Syrian air defense of the Soviet model in Lebanon) were moving into the rapidly growing civilian IT sector. Including orders from American corporations, primarily in the field of software: between 1984 and 1991, the value of software exports from Israel increased from 5 million to 110 million US dollars. From the growing Elron, new profile companies, already predominantly civilian, emerged along the way: Elscint for the production of medical electronics, Orbotech for the production of optical quality control systems for the production of printed circuit boards, and so on and so forth.
Elron headquarters in Azrieli Towers, Tel Aviv
However, the Israeli IT industry experienced a real explosion in the 90s, when more and more local and international venture funds, along with state support programs for IT startups, joined the cause. They have spawned one of the most efficient innovative IT environments on the planet. In addition to high-quality technical education and extensive ties with American universities and companies, a significant role in strengthening the Israeli “silicon valley” in the 90s was played by the mass repatriation of “computer scientists” and programmers from under the collapsed “Iron Curtain”.
Increasingly, the largest American IT corporations such as IBM, Intel, Yahoo!, Google not only dumped outsourcing in Israel, but opened full-fledged R&D centers in the country, of which there are now more than a hundred in Tel Aviv alone. It was during these years that Israeli developers created such famous products as ICQ and flash drives. In addition to military developments, medical computer systems and software for them have become an important specialization of Israeli IT companies.
Now the Israeli “silicon valley”, as it was said, is concentrated primarily in the areas of Haifa and Tel Aviv. Among the most notable technology parks are the already mentioned Matam in Haifa, the industrial zone in Herzliya Pituach north of Tel Aviv and the Yarkon industrial zone in the north of Tel Aviv, the Azorim industrial park in the Kiryat Arya industrial zone in Petah Tikva, the Technology Center in Jerusalem Minchat, and many more places and names. It is no coincidence that one of the popular journalistic clichés about modern Israel and its IT-sphere has become a “nation of startups” or “country of startups”: in a sense, all of Israel can be called one big distributed “silicon valley”.
And although it is not as grandiose in absolute numbers and the number of “unicorns” as the Chinese and Indian “valleys” – but the Israeli “silicon wadi” compensates for this with a strong focus on supporting bold start-ups, innovativeness of the “cutting edge” and very deep, systemic ties with California’s Silicon Valley. That is why the debate over which of Asia’s largest “silicon valleys” can be called “first among equals” involves three rather than two.
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