Silicon Wadi

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Azorim High-Tech park in Petah-Tikva
Matam High-Tech park in Haifa
Intel building in Petah Tikva
IBM building in Petah Tikva

Silicon Wadi[1] (Hebrew: סיליקון ואדי‎, lit: "Silicon Valley") is an area with a high concentration of high-tech industries[2] in the coastal plain in Israel, similar to Silicon Valley in California, in the United States. Silicon Wadi is considered second in importance only to its Californian counterpart.[3][4] The area covers much of the country, although especially high concentrations of hi-tech industry can be found in the area around Tel Aviv including small clusters around the cities of Ra'anana, Petah Tikva, Herzliya, Netanya, the academic city of Rehovot and its neighbour Rishon Le Zion. In addition, hi-tech clusters can be found in Haifa and Caesarea. More recent hi-tech establishments have been raised in Jerusalem, and in towns such as Yokneam Illit and Israel's first "private city," Airport City, near Tel Aviv.

Origin of the term[edit]

Silicon Wadi is a pun based on the Californian region of Silicon Valley. "Wadi" is the Arabic word for a valley or dry river bed, also commonly used in colloquial Hebrew.

History[edit]

Israeli hi-tech firms originally began to form in the 1960s.[5] In 1961 ECI Telecom was founded, followed in 1962 by Tadiran and Elron Electronic Industries regarded by many to be the "Fairchild of Israel."[5] The number of internationally successful firms grew slowly, with only one or two new successful firms each year until the early 1990s. Motorola was the first US corporation to set up an R&D unit in Israel, in 1964.[5] The center initially developed wireless products including remote irrigation systems and later developed leading chips such as the 68030.[5] Following the 1967 French arms embargo, Israel was forced to develop a domestic military industry, focusing on developing a technological edge over its neighbors.[5] Some of these military firms started to seek and develop civilian applications of military technology.[5] In the 1970s more commercial innovations began, many of which were based on military R&D, including: Scitex digital printing systems which were based on fast rotation drums from fast-rotation electronic warfare systems.,[5] Elscint, which developed innovative medical imaging and became a leading force in its market.[6]

Hi-tech firms continued to struggle throughout this period with marketing and many products, such as a mini-computer developed in the 1970s by Elbit, who were unable to successfully commercialise the product.[5]

World software market takes off[edit]

Slowly, the international computing industry shifted the emphasis from hardware (in which Israel had no comparative advantage) to software products (in which human capital plays a larger role).[5] The country became one of the first nations to compete in global software markets.[5] By the 1980s a diverse set of software firms had developed. Each found niches which were not dominated by US firms and between 1984 and 1991 "pure" software exports increased from $5 million to $110 million. Many of the important ideas here were developed by graduates of Mamram, the Israeli computer corps, established by the IDF in the 1960s.[5]

During the 1980s and early 1990s several successful software companies emerged from Israel, including: Amdocs (established in 1982 as Aurec Information), Cimatron (established in 1982), Magic Software Enterprises (established in 1983), Comverse (established in 1983 as Efrat Future Technologies), Aladdin Knowledge Systems (established in 1985), NICE Systems (established in 1986), Mercury Interactive (established in 1989) and Check Point Software Technologies (established in 1993).

The 1990s saw the real takeoff of hi-tech industries in Israel, with international media attention increasing awareness of innovation in the country.[5] Growth increased, whilst new immigrants from the Soviet Union increased the available hi-tech workforce.[5] Peace agreements including the 1993 Oslo Peace Accord increased the investment environment and Silicon Wadi began to develop into a noticeable hi-tech cluster.[5]

Dot-com boom[edit]

In 1998, Mirabilis, an Israeli company that developed the ICQ instant messaging program, which revolutionized communication over the Internet,[7] was purchased by America Online (AOL) for $407 million in cash, 18 months after it was founded and having no revenues. The free service attracted a user base of 15 million in that period and by 2001, ICQ had over 100 million users worldwide.[8]

The success of Mirabilis triggered the dot-com boom in Israel; thousands of start-up companies were established between 1998 and 2001, while venture capital raised by Israeli companies reached $1,851 million in 1999, peaking at $3,701 million in 2000. Over fifty Israeli companies had initial public offerings on NASDAQ and other international stock markets during that period.[9]

Silicon Wadi today[edit]

For more than 50 years local demand fueled Israeli industrial expansion, as the country's population grew rapidly and the standard of living rose. More recently, world demand for Israeli advanced technologies, software, electronics, and other sophisticated equipment has stimulated industrial growth. Israel's high status in new technologies is the result of its emphasis on higher education and research and development. Cultural factors contributing to the expansion includes chutzpah and openness to immigration.[10] The government also assists industrial growth by providing low-rate loans from its development budget. The main limitations experienced by industry are the scarcity of domestic raw materials and sources of energy and the restricted size of the local market. One certain advantage is that many Israeli university graduates are likely to become IT entrepreneurs or join startups, about twice as much as US university graduates, who are also attracted to traditional corporate executive positions, according to Charles A. Holloway, co-director of the Center for Entrepreneurial Studies and a professor at the Stanford Graduate School of Business of Stanford University.[11] ICQ, for instance, is one of the world's most famous Israeli software products, developed by 4 young entrepreneurs.[12] IBM has its IBM Content Discovery Engineering Team in Jerusalem,[13] which is part of a number of IBM R&D Labs in Israel.

Geneaological research[edit]

According to research conducted by Prof. Shmuel Ellis, Chair of the Management Department at Tel Aviv University's Faculty of Management, together with Prof. Israel Drori of the School of Business Administration at the College of Management and Prof. Zur Shapira, Chair of the Management and Organizations Department at New York University, the RAD Group, founded in 1981 by brothers Yehuda and Zohar Zisapel, has been "the most fertile ground" for creating Israeli entrepreneurs, having produced 56 "serial entrepreneurs" who established more than one start-up each. RAD Group "graduates" were responsible for the establishment of a total of 111 significant hi-tech initiatives.[14]

Location[edit]

HP, Intel and Micron production plants in Kiryat Gat

Due to the small size of Israel, the concentration of hi-tech firms across much of the country is enough for it to be recognised as one large cluster. Most activity is located in the densely populated areas of metropolitan Tel Aviv, Haifa (Matam), and Jerusalem (Technology Park, Malha, Har Hotzvim and JVP Media Quarter in Talpiot), and the Startup Village Ecosystem in the Yokneam area, although some secondary with additional activity include the corridor to Beer Sheba, including Kiryat Gat, and the Western Galilee. In all, this is an area no larger than 6000 square kilometers, half of the extended Silicon Valley's geographical coverage.[5]

Economy[edit]

Many international technology companies have research and development facilities in this region including the likes of Intel, IBM,[13] Google, Hewlett-Packard, Philips, Cisco Systems, Oracle Corporation, SAP, BMC Software, Microsoft, Motorola and CA. Many Israeli high-tech companies are based in the region, including Zoran Corporation, CEVA, Inc., Aladdin Knowledge Systems, NICE Systems, Horizon Semiconductors, RAD Data Communications, RADWIN, Radware, Tadiran Telecom, Radvision, Check Point Software Technologies, Amdocs, Babylon Ltd., Elbit, Israel Aerospace Industries and the solar thermal equipment designer and manufacturer Solel, with most of them being listed on the NASDAQ, which even has an Israel Index. Intel developed its dual-core Core Duo processor at its Israel Development Center located at the Merkaz Ta'asiya ve'Meida (Matam - Scientific Industries Center) in the city of Haifa.[15] In 2006, more than 3,000 start-ups were created in Israel, a number that is only second to the US.[16] Newsweek Magazine has also named Tel Aviv as one of the world's top ten "Hot High-Tech Cities".[17] In 1998, Tel Aviv was named by Newsweek as one of the ten technologically most influential cities in the world.[18] In 2012, the city was also named one of the best places for high-tech startup companies, placed only second behind its California counterpart.[19][20]

Importance[edit]

The importance of Silicon Wadi was first recognised internationally by Wired magazine, who in 2000, ranked locations by the strength of cluster effects, giving the Israeli high-tech cluster the same rank as Boston, Helsinki, London, and Kista in Sweden, second only to Silicon Valley.

Israeli venture capital industry[edit]

Jerusalem Venture Partners (JVP) compound in Jerusalem, one of Israel's largest Venture Capital firms.

The origins of the now thriving Venture Capital industry in Israel can be traced to a government initiative in 1993 named the Yozma program ("Initiative" in Hebrew); which offered attractive tax incentives to any foreign venture-capital investments in Israel and offered to double any investment with funds from the government.[21] As a result Between 1991 and 2000, Israel's annual venture-capital outlays, nearly all private, rose nearly 60-fold, from $58 million to $3.3 billion; companies launched by Israeli venture funds rose from 100 to 800; and Israel's information-technology revenues rose from $1.6 billion to $12.5 billion. By 1999, Israel ranked second only to the United States in invested private-equity capital as a share of GDP. And it led the world in the share of its growth attributable to high-tech ventures: 70 percent.[21]

Israel's thriving venture capital industry has played an important role in the booming high-tech sector, the financial crisis of 2007-2010 also affected the availability of venture capital locally. In 2009, there were 63 mergers and acquisitions in the Israeli market worth a total of $2.54 billion; 7% below 2008 levels ($2.74 billion), when 82 Israeli companies were merged or acquired, and 33% lower than 2007 proceeds ($3.79 billion) when 87 Israeli companies were merged or acquired.[22] Numerous high tech Israeli companies have been acquired by global corporations for its provision of reliable and quality corporate personnel.[23]

Israel's venture capital industry has about 70 active venture capital funds, of which 14 international VCs with Israeli offices. Additionally, there are some 220 international funds, including Polaris Venture Partners, Accel Partners and Greylock Partners, that do not have branches in Israel, but actively invest in Israel through an in-house specialist.

In 2009, the Life Sciences Sector led the market with $272 million or 24% of total capital raised, followed by the Software Sector with $258 million or 23%, the Communications sector with $219 million or 20%, and the Internet sector with 13% of capital raised in 2009.[22]

Multinational technology companies operating in Israel[edit]

SanDisk's Israel facility in Kfar Saba
Marvell's development center in Petah Tikva
CA Technologies' development center in Herzliya

As of 2010, more than 35,000 professionals are employed in multinationals' R&D centers in Israel, making 'Silicon Wadi' a source for worldwide strategic technology development. Around 60 foreign R&D centers are engaged in a diverse range of activities including communication equipment, components, software, semiconductors, Internet communication and more.[24] They include amongst others:

Company Year established in Israel No of employees in Israel Major acquisitions in Israel
IBM 1949 2,000 Ubique,[25] I-Logix,[26] XIV,[27] Guardium,[28] Diligent Technologies,[29] Storwize,[30] Worklight,[31] Trusteer[32]
Motorola 1964 1,500 Terayon,[33] Bitband[34]
Intel 1974 9,200 DSPC[35] Envara,[36] Comsys,[37] InVision Biometrics,[38] Telmap[39]
Microsoft 1989 750 Maximal,[40] Peach Networks,[41] Whale Communications,[42] Gteko,[43] YaData,[44] 3DV Systems[45]
Applied Materials 1991 1,200 Orbot Instruments, Opal Technologies,[46] Oramir Semiconductor[47]
Cisco Systems 1997 1,500 CLASS Data Systems, HyNEX, Seagull Semiconductor, PentaCom, P-Cube, Riverhead Networks,[48] Intucell,[49] Sheer Networks,[50] NDS Group[51]
Hewlett-Packard 1998 6,000 Indigo Digital Press, Scitex Vision, Nur Macroprints, Mercury Interactive, Shunra[52]
SAP AG 1998 800 OFEK-Tech, TopTier Software, TopManage, A2i[53]
Alcatel Lucent 1998 250 LANNET, Chromatis Networks, Mobilitec[54]
GE Healthcare 1998 400 Nuclear and MR businesses of Elscint,[55] Diasonics Vingmed[56]
BMC Software 1999 450 New Dimension Software,[57] Identify Software[58]
CA Technologies 1999 300 Security-7, Abirnet, XOSoft, Oblicore, Nolio
Philips Electronics 1999 700 Elscint, Veon, CDP Medical[59]
Broadcom 2000 500 VisionTech, M-Stream, Siliquent Technologies, Dune Networks, Percello, Provigent, SC Square[60]
Marvell Technology Group 2000 1,600 Galileo Technology[61]
Siemens 2000 900 eship-4u, Tecnomatix Technologies, Solel Solar Systems
EMC Corporation 2004 1,000 Kashya, nLayers, proActivity, Illuminator, ZettaPoint, Cyota,[62] XtremIO[63]
eBay 2005 400 Shopping.com, Fraud Sciences, The Gift Project[64]
SanDisk 2006 650 M-Systems[65]
Google 2006 350 LabPixies, Quiksee, modu (patents only),[66] Waze[67]
Red Hat 2008 200 Qumranet[68]
VMware 2008 200 B-Hive networks,[69] nlayers,[70] Digital Fuel,[71] Wanova[72]
Micron Technology 2010 1,300 Acquired Numonyx, a joint venture by Intel Corporation and STMicroelectronics[73]
Apple Inc. 2012 450 Anobit,[74] PrimeSense[75]
Covidien 2012 1,200 Oridion Systems,[76] superDimension, PolyTouch[77] Given Imaging

See also[edit]

References[edit]

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  3. ^ "Land of milk and start-ups", The Economist, 2008-03-19, retrieved 2008-03-22. 
  4. ^ Dolmadjian, Katia (28 June 2011). "Israeli innovators build new 'Silicon Valley'". AFP. Retrieved 30 June 2011. 
  5. ^ a b c d e f g h i j k l m n o Catherine de Fontenay and Erran Carmel, Israel’s Silicon Wadi: The forces behind cluster formation, June 2002
  6. ^ Elscint Ltd. - Company history FundingUniverse
  7. ^ Yair Goldfinger, serial entrepreneur / An intensely private technology angel, The Marker
  8. ^ "Is the ICQ experiment working?". CNET News. May 9, 2001. 
  9. ^ Venture capital investment in Israel: Policy Review - OECD 2003
  10. ^ Chutzpah of Israeli Startups, http://radoff.com/blog/2009/12/05/chutzpah-of-israeli-startups/
  11. ^ Gordon, Buzzy (2000-05-26). "Silicon Wadi not that far from Silicon Valley, prof says". j. Retrieved 2012-01-04. 
  12. ^ New Jersey Technology Council
  13. ^ a b IBM Research | IBM Haifa Labs
  14. ^ "The Mother of the Start-Ups: The RAD Group Gave Birth to 110 Companies". The Marker. January 18, 2012. 
  15. ^ Israel Saves Intel
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  17. ^ Consulate General of Israel in Chicago — Israel's Economic and Business Climate. Letter from the Minister of Industry and Trade
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  20. ^ Tel Aviv named top startup center | ISRAEL21c
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  22. ^ a b Venture Capital in Israel
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  31. ^ "IBM Advances Mobile Capabilities with Acquisition of Worklight" (Press release). IBM. 2012-01-31. Retrieved 2012-01-31. 
  32. ^ IBM Buys Israel/US Cybersecurity Specialist Trusteer For $800M-$1B
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  36. ^ "Intel buys Envara for $40m". Globes. 25 March 2004. 
  37. ^ Belic, Dusan (July 6, 2010). "Intel acquires Israel-based Comsys Mobile Communication and Signal Processing". InfoMobile. 
  38. ^ Shelah, Shmulik (30 October 2011). "Intel in talks to buy Israel's InVision Biometrics". Globes. 
  39. ^ [1]. The New York Times. Retrieved October 2, 2011.
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  42. ^ "Microsoft Corp acquires Whale Communications Ltd". Thomson Financial. 2006-07-26. Retrieved 2008-10-31. 
  43. ^ "Microsoft Corp acquires Gteko Ltd". Thomson Financial. 2006-09-26. Retrieved 2008-10-31. 
  44. ^ "Microsoft Corp acquires YaData Ltd". Thomson Financial. 2008-02-27. Retrieved 2008-10-31. 
  45. ^ Wingfield, Nick (May 13, 2009). "Microsoft Swings at Wii With Videocam". Wall Street Journal. 
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  49. ^ Cisco announces intent to acquire Intucell, Jan 2013
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  52. ^ "HP to Acquire Network Virtualization Business & Technology of Shunra". HP next. 4 March 2014. 
  53. ^ SAP - Dedicated Partner to Israel, Invest in Israel
  54. ^ Lucent Technologies Completes Acquisition of Mobilitec, a Leading Provider of Content Delivery and Management Software
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  59. ^ E-Health Insider, 3 Aug 2010 :: Philips acquire Israeli PACS company
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  62. ^ EMC CEO: We'll make more acquisitions in Israel - Globes, 7 Dec 2011
  63. ^ EMC Acquires XtremIO, May 2012
  64. ^ Goldenberg, Roy (8 September 2011). "eBay buys Israeli start up The Gifts Project: The price is estimated to be in the tens of millions of dollars.". Globes. 
  65. ^ "SanDisk Completes Acquisition of Msystems" (Press release). SanDisk. 2006-11-19. Retrieved 2010-07-31. 
  66. ^ "Google acquires Modu". cnet. Retrieved 2011-05-20. 
  67. ^ Google Bought Waze For $1.1B, Giving A Social Data Boost To Its Mapping Business
  68. ^ "The Evolution of Virtualization: Qumranet joins Red Hat." (Press release). 2008-09-04. 
  69. ^ VMware to Acquire B-hive Networks to Further Enhance Virtualization Platform with Application Performance Management, VMware News Releases, May 28, 2008
  70. ^ VMware to Acquire Several Management Products from EMC Ionix, Ben Verghese, VMware Blogs - February 25, 2010
  71. ^ VMware To Acquire Digital Fuel, IT Financial and Business Management SaaS Company, VMware News Releases, June 13, 2011
  72. ^ VMware To Acquire Wanova, Intelligent Desktop Solutions Provider, VMware News Releases, May 22, 2012
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  74. ^ "Apple Said to Acquire Israel’s Anobit for About $390 Million". Bloomberg. January 12, 2012. 
  75. ^ Apple Agrees to $350 Million Deal for Israel’s PrimeSense, Bloomberg
  76. ^ Covidien to Buy Jerusalem-Based Oridion for $346 Million, David Wainer, Bloomberg - Apr 5, 2012
  77. ^ Covidien shopping spree could continue The medical device company has announced three acquisitions in Israel this year, Gali Weinreb, Globes May 12, 2012

External links[edit]