Looking back on the Israeli technology story

Israel's prowess in high-tech and healthcare goes back more than the State's 60 years, and is powered by many motives.

Israels high-technology scene is far from being 60 years old. For nearly 20 years of its existence Israel imported all of its technology needs, mostly from France. Its proudest achievement was drip irrigation. Israels exports consisted mainly of citrus fruits. Its universities did not concentrate on sciences and engineering.

Everything changed with the end of the Six Day War in 1967. An angry Charles de Gaulle placed an embargo an all arms and weapons sold to Israel.. A group of individuals. with Don Tolkowsky, the one time Air Force Chief leading them, made a fateful decision that Israel, from now on will have to create its own technology industries and products. The Technion Institute of Science created new fields of study that included computer sciences and electronic engineering. The Government moved slowly to put in place a list of incentives. The incubator program was spawned and next to the Weizmann Institute, the first science based industries park was built.

It was a slow process, but by the beginnings of the 1980s a group of companies emerged that included Scitex, Elscint, ECI Telecom, Laser Industries. Elron Electronic, Elbit, InterPharm and BioTechnology General. By and large they had unique products like ECI Telecom that developed a speech multiplication system that multiplied up to 8 times the amount of speech that cold be transmitted. Scitex developed cameras and printers that allowed for the adjustment of photos to the specifications of the designer. InterPharm became the worlds first producer of interferon drugs, based on Weizmann Institute science. At the institute Prof. Michael Sela partnered with Prof. Ruth Arnon were experimenting in creating a drug that would extend the period between multiple sclerosis attacks. In the event their work resulted in a drug named Copaxone, Last year Teva Pharmaceutical sold globally $1.7b. worth of Copaxone.

Ormat Technologies, Inc, (NYSE: ORA) is a leading vertically integrated company dedicated to providing solutions for geothermal power, recovered energy generation (REG) and remote power. Its geothermal converters capture underground energy and have found an international market. Recently the company signed a contract to build a six-megawatt (MW) May 2008 waste-heat recovery renewable energy project in the Goodsprings area 35 miles south of Las Vegas.

The Charles de Gaulle embargo led to the founding of defense industries. Today it has become the worlds fourth largest exporter of defense materiel. Israeli head up display helmets are in the American F- 16s and have found buyers in all parts of the world. Raphaels missiles have found buyers internationally and small arms such as the Uzi are used internationally.

Today Israel is considered a high-technology powerhouse. Nearly 40% of exports are technology based. Approximately 125 companies are public and trade on international stock markets, mostly NASDAQ. In recent years the British AIM market with its generally loose requirements has attracted a slew of Israeli companies to list there. Over the years we have been studying what are the compelling reasons for Israelis to seek an American listing. All who understand the US markets generally accepts some of the reasons but some are related to internal Israeli considerations. Our list of considerations includes: The US capital market is the biggest/most sophisticated/ most professional/ most efficient and certainly most widely reported market with the exposure provided for these companies helping them to build product images and investment loyalty. These companies are reported on not only on television, in the printed media but also on Internet sites.

The Governments cocktail of financial incentives continue to be a major assist. Nearly every startup can obtain a grant of $250,000 to determine whether it has a saleable product.

The salaries paid by high-tech companies are way above the national average and create a huge incentive for young men who complete their army service. Many of these, during their period of service, worked in highly technical positions. They learned computers and algorithms. The latter were often enough to start a new company.

Investment capital continues to flow into Israel. Last year of the $1.7 billion invested in technology enterprise, more than half, had its origin outside of Israel.

With a healthy infrastructure, a supportive Government and an intelligent workforce the outlook continues to be positive.

The early days

The Negev, the southern part of modern day Israel, according to the Old Testament Book of Genesis, in the years 1800-1600 BCE was a favorite watering place of the Jewish Patriarchs Abraham and Isaac. In the Old Testament Book of Numbers Moses is quoted as saying,Go up through the Negev and on, into the hill country. The modern day Negev includes desert and canyon regions; from Beersheva all the way down to Eilat, on the Red Sea. It covers approximately 5,140 square miles; more than half of Israels total land area.

The Negev receives a scant 2-4 inches of rainfall annually. The climate is hot and dry, typical of a desert. David Ben-Gurion the first Israeli first Prime Minister was the man credited as the key leader in the establishment of the modern State of Israel in 1948. The Premier called for the establishment of pioneering settlements in outlying areas, especially in the Negev. After leaving the government, he returned to Kibbutz Sde Boker. His retirement to this small agricultural community in the Negev was a testimonial of his philosophy of developing the wilderness. During one of my visits to Sde Boker in the 1960s I heard from the Old Man as Ben-Gurion was called, his detailed dream of a desert based agriculture, converting the hot desert sun into a useful energy source and setting up a major University in Beersheva. Agriculture in the desert was unlikely but Sdeh Boker's farmers raised impressively sized peaches, and adjacent to the Old Man modest shack roses grew in the sand. We succeed growing peaches but the lack of rainfall forces us to bring potatoes from Central Israel, he mused. Ben-Gurions vision finally appears to be on the track to realization.

The lack of water to meet Israels growing need for food resulted in the development of the ingenious drip irrigation system. Drip irrigation, is also known as trickle irrigation or microirrigation is an irrigation method that minimizes the use of water and fertilizer, by allowing water to seep slowly to the roots of plants, either onto the soil surface or directly onto the root zone, through a network of valves, pipes, tubing, and emitters.

About 1960, Mr.Symcha Blass an employee of a British Water Agency, immigrated to Israel. There is a fable (which could be true, because it came from his own mouth) about Symcha Blass sitting next to a tree, which was near a leaking faucet and Eureka! But there is also no doubt that he knew about the British greenhouse application of micro-tubes. With the desperate water shortage in Israel, he decided that this technology would be useful for growing crops in the field as well as in greenhouses. The microtube was first wrapped around the feeding tube to keep it out of the way to prevent damage. This was followed by a molded coupling, with the spiral molded in. In turn this developed into the ubiquitous two-piece inline dripper described in Blass> patent. Blass did his work at Kibbutz Hatzerim and formed the basis of the Netafim, irrigation enterprise, whose annual exports lately exceed $350m.

Modern drip irrigation has arguably become the most important innovation in agriculture since the invention of the impact sprinkler in the 1930s, which had replaced wasteful flood irrigation. Drip irrigation may also use devices called micro-spray heads, which spray water in a small area, instead of dripping emitters. These are generally used on tree and vine crops with wider root zones. Subsurface drip irrigation or SDI uses a permanently or temporarily buried dripper line or drip tape located at or below the plant roots. It is becoming more extensively used for row crop irrigation especially in areas where water supplies are limited or recycled water is used for irrigation. Simple in concept and execution water is small amounts directed by small water pipes that aim directly at the root of a plant. Fertigation came next. It allowed fertilizers to be added to the water. These simple systems were exported throughout the world and earned hundreds of millions of dollars in exports for Israel. In six decades this country has produced six Nobel Prize winners. These world-class individuals are just a part of the nucleus, of a society that participates in globalization and increases the economic standard of the citizens of this country. Most of Israels outstanding scientific and technological developments have been mentioned, over the years, in individual issues of our Israel High-Tech & Investment Report. However, on the occasion of the 60th Day of Independence we take the opportunity of listing, some of these achievements together.

In the 1990s, Israel became only the eighth country in the world to develop and launch satellites, beginning with the Amos civilian c o m m u n i c a t i o n s satellite, followed by the Ofek military satellites and the Eros civilian photoreconnaissance satellite. Israel now partners with NASA, the ESA and the Russian space program, building component and complete satellites for scientific and civilian uses.

With 3,000 start-ups, the Global Competitiveness Report by 2000 ranked Israel second behind the US in the number of start-ups a relative to population. The weight of start-ups of GDP was 3% in 2000.

The comparable figures for the US was 0.3% and 0.1%, respectively. Israel was highly ranked in terms of the number of engineers and May 2008 education, but poorly in terms of physical infrastructure, a situation the government is trying to remedy. Israel was ranked second in civilian R&D expenditure as a percentage of GDP, rising from 2.7% in 1994 to 4.2% in 1999. Total R&D expenditure in 2000 was $4.2 billion and NIS 23.9 billion in 2001. State expenditure on civilian R&D has been rising faster than GDP through the 1990s, mostly being invested in high-tech, but also agriculture, manufacturing and biotechnology.

Israel developed the Lavie, a single seater jet fighter that proved to be technically successful, but American pressure and the high cost of production led to the cancellation of the program. Computer technology and telecommunications rank high on the list. We recall that the cell phone was first developed at the Motorola plant in Israel.

Most of the Windows NT and XP operating systems were developed by Microsoft-Israel. The Pentium MMX Chip technology was designed at Intel Israel. Both the Pentium-4 microprocessor for desktop computers and the Centrino processor for laptops were entirely designed, developed and produced in Israel. Computerized billing technology was developed in Israel. The Israeli company Amdocs is the largest company in the world in this field.

Both Microsoft and Cisco built their only foreign-based research and development facilities in Israel. Four young Israelis developed the program ICQ, which is the technological basis for AOL Instant Messenger, in 1996. Israeli software company Check Point is the global leader in Virtual Private Network (VPN) and firewall technologies.

In proportion to its population, Israel has the largest number of start-up companies in the world. In absolute terms, Israel has the largest number of start-up companies, than any other country in the world, second only to the US. With more than 3,000 high-tech companies and start-ups, Israel has the highest concentration of hi-tech companies in the world - with the exception of Silicon Valley.

The Israeli company M-Systems developed Disk on Key -a portable, virtual hard disk. When we travel we never neglect taking vital material on this miniature hard disk, with us.

Israel is ranked #2 in the world for venture capital funds, right behind the United States. Outside the United States and Canada, Israel has the largest number of companies listed on NASDAQ.

A 12th century physician Moshe ben Maimon- Rambam (Maimonides) is the role model for a generation of Israeli physicians who became active not only in the care of the sick but also in the development of treatments and medical systems. They developed the first fully computerized, noradiation diagnostic instrumentation for breast cancer.

An Israeli company developed a computerized system for ensuring the proper administration of medications, thus removing human error from medical treatment. Every year in U.S. hospitals 7,000 patients die from treatment mistakes. Given Imaging developed the PillCam - the first ingestible video camera, which is so small it fits inside a pill. Used to view the small intestine from the inside, the camera helps doctors diagnose digestive disorders of the small intestine and esophagus without invasive treatment.

C2Cure is producing disposable miniature imaging medical devices. The viewing systems consist of miniature, disposable video camera and a light source that are assembled on the tip of endoscopes. The technology is suitable for minimally invasive surgery endoscopic market and the intra-vascular segment. The company was eventually acquired by Olympus. May 2008

A new acne treatment developed in Israel causes acne bacteria to self-destruct - all without damaging surroundings skin or tissue. A new arterial implant has been developed in Israel that can lower the risk of stroke, by diverting blood clots away from sensitive areas of the brain. Primate research at Hebrew University is leading to the development of a robotic arm that can respond to the brain commands of a paralyzed person.

Two Israeli researchers are creating cancer-killing molecules that will recognize cancerous cells and target them aggressively, while not affecting normal cells. Israeli researchers developed a novel stem cell therapy to treat Parkinsons Disease - using a patients own bone marrow stem cells to produce the missing chemical that enable the restoration of the motor movement. Insightec developed an ultrasound system for removing tumors without surgery.

Researchers at the Technion have developed an antibiotic that destroys anthrax bacteria as well as the toxins it secretes into the bloodstream of the infected body. Elta is responsible for equipping the worlds first civilian aircraft with technology designed to protect airliners from a missile attack.

The ill fated Columbia space shuttle carried Israel's first astronaut, Col. Ilan Ramon. Israel's space agency was formed in 1983, but its first opportunity to send someone up didnt come until President Bill Clinton offered to have an Israeli astronaut fly aboard the shuttle. Small, unheralded companies in encryption, electronic closures, and night-vision, have the benefit of bringing to the business personnel, whose experience has been honed through working on advanced defense technologies. This is one key to identifying technology companies as winners well before they make their mark in the business world.

Driven by the fundamental belief in the sanctity of life, Israeli doctors, surgeons, engineers and technologists, have worked together for the past 30 years, turning this country into a center of medical advances. Among the important innovations is the development of unique medical lasers.

These innovative lasers are now marketed globally, with annual sales of $350 million in 2002. One individual stands out in the field. Professor Isaac Kaplan, a brilliant surgeon, (whose reconstructive surgery helped to restore the bodies of wounded soldiers), has also been an important researcher and innovator. In the 1970s, early in the history of the development of medical lasers, he focused his attention on research, which resulted in the development of a broad line of carbon dioxide surgical lasers. This gave birth to an important high-tech industry. After overcoming the technical difficulties, several thousand of the carbon dioxide surgical medical lasers were sold worldwide.

What is it that drives Israelis to reach this level of achievement? The answer is rooted in part in the tradition of intellectual curiosity and analysis, which is an aspect of Jewish culture. It is a tradition that emphasizes education and that has produced, out of all numerical proportion, outstanding scientists and inventors. This age-old reverence for education has found expression in the development of a good Israeli public school system as well as excellent universities and institutes of science and technology.

Even more likely, the technological accomplishments may be a result of the innate stubbornness, resilience, and creative drive of a polyglot people. Because of the multinational mix of the population, many of the researchers have brought with them a variety of experiences and points of view acquired in different parts of the world. All are joined together by the determination to create a country, which will become strong in spite of a lack of natural resources and of hostility on the part of most of its neighbors. This need for national security has led to the development of new defense technologies.

Ambition for a better quality of life and higher standards of living has led to the creation of an export-driven economy. And most Israelis are aware that the ability to sell and succeed in the international marketplace is dependent on their products being more innovative and better priced than those of the countrys competitors.

The adaptation of this concept marked the birth of Israels high-technology industries, which for the greater part are dedicated to supply the critical needs of a country, which needed to be always ready to defend itself. It was a slow go at first but once momentum gathered Israelis turned to technology in earnest. They often are overvalued but continue to maintain their attractiveness for international companies who seek to buy the technology or become strategic venture partners or marketers of the product, and for investors who pay many times the shares earnings so as to own them in their investment portfolio. The they are the Israeli high technology companies which, when lumped together, are a growing mass containing an expanding base of technological knowledge.

Published by Globes [online], Israel business news - www.globes.co.il - on June 19, 2008

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