All we lack is focus

How Israel's high-tech industry can stay competitive.

In recent years, a growing number of voices have expressed concern for the future of the Israeli high-tech industry. These concerns stem from the rapid growth of high-tech industries in China and India, and the consequences this growth could have for Israel.

At present, this does not amount to an immediate threat. After all, Israel has gained world renown for its excellence in technology, and international companies are still basing more projects requiring excellence and innovative in thinking in Israel than in India and China. To this one must add the high level of entrepreneurship in Israel, as seen in the multitude of start-ups which translate technological ideas into cutting edge products on global markets in record time.

So what is it that people fear? That within a few years the Indian and Chinese industries will narrow the gap, begin successfully bidding for more projects that are more complex, gradually learn how to take a technological idea and build an advanced product line on it, and set up companies that will bring those ideas onto global markets. It took us 15-20 years to do this; it will take them less, and the moment these gaps start narrowing, the weight of the critical mass of professional manpower at their disposal will be felt in full. Competing against them will be exceptionally tough and complicated once that happens.

The Ra'anana Conference for National High Tech Policy, opening tomorrow, will look at ways to cope with the challenges facing high-tech industries in Israel, with a view to heading off the impeding crisis. I am of the opinion that the measures to cope with these global developments should focus primarily on two tracks - industry and resources.

As far as industry is concerned, there needs to be a concentrated effort on a select number of preferred areas. The 1980s and 1990s were characterized by breakthroughs in telecommunications and innovative silicon chips. We were astute enough to ride that wave of innovation and develop several outstanding companies. But it is not entirely clear whether this will be the right wave for us to be riding in the coming years, since these industries are undergoing a process of consolidation, and the game is principally one for the large players. On the other hand, there are a number of industries on the verge of a breakthrough - of the same sort that the semiconductor and telecommunications industries made in the 1980s - such as solar cells, or life sciences or drugs.

As far as resources are concerned, there needs to be a review of the focus across all stages from design concept to mass production. There is a pronounced lack of the requisite resources, both at the point of transition from basic research to technological development, and the final funding stages, to turn the flourishing start-up industry into a large, thriving industry made up of multinational companies.

Our inability to finance the transition from basic research to initial development has created a situation where projects with tremendous industrial potential get stuck in what is known as the "valley of death" and end up as research papers in professional literature. The thriving venture capital industry in Israel invariably avoids entering projects like these because of the need to show a return and make an exit after three to seven years.

Many of those projects that don't make it across the "valley of death" could have produced amazing returns, but they need a period of grace of up to ten or even fifteen years in order to realize their potential in full. Therefore, to bring about a tangible change in the now all-too-familiar exit culture, there need to be investment institutions that will specialize and focus on the later stages of company development.

The Israeli high-tech industry's qualitative edge can be maintained, but this will need a focused effort on funding the critical stages in the evolution process, from design concept to a mass production industry. The infrastructure is there. So are the resources. All that's missing is the focus.

The writer is chairman of Yissum Technology Transfer Company of the Hebrew University of Jerusalem and co-founder and chairman of Exanet Inc., Qumranet Inc., Prolify Inc., and Itamar Medical Ltd..

Published by Globes [online], Israel business news - - on June 23, 2008

© Copyright of Globes Publisher Itonut (1983) Ltd. 2008

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