A significant trend is emerging within Israel's crucial technology sector, as the ongoing conflict with Hamas prompts more local employees of global corporations to seek transfers abroad. This shift poses a potential long-term risk to the country's status as an innovation hub, according to a recent industry analysis.
Relocation Requests Surge Among Tech Workforce
The Israel Advanced Technology Industries Association (IATI) disclosed in its annual report that 53% of multinational companies operating in Israel have recorded an increase in relocation requests from their Israeli staff over the past year. This period coincides with the two-year war against the Palestinian militant group. The report warns this is "a trend that may, over time, harm the local innovation engine and Israel's technological leadership."
The concern is substantial given the tech industry's pivotal role in the national economy. This sector is responsible for roughly 20% of Israel's GDP, provides 15% of all jobs, and accounts for more than half of the country's exports. Major global players like Microsoft, Intel, Nvidia, Amazon, Meta, and Apple all have significant operations within Israel.
Examining Investments and Supply Chain Shifts
Beyond employee mobility, the IATI report highlighted broader strategic concerns. It noted that some multinational firms are actively reviewing the transfer of investments and business activities to other countries. The disruptions caused by the war have forced companies to find alternative supply chains outside Israel.
"In some cases, companies that faced disruptions in supply chains found alternatives outside Israel during the war, and when these proved efficient, there is a risk that activity will not fully return," the report explained. This analysis was presented at a meeting led by IATI's CEO and President, Karin Mayer Rubinstein.
The desire to relocate is not limited to junior staff. The report found an increased demand for moves abroad among senior executives and families, with more professionals applying for positions outside the country.
Resilience Amidst Uncertainty
Despite these challenges, the report also underscores the enduring strength of the Israeli tech ecosystem. It states that multinationals generally view the market through a long-term lens, and many have even prospered during the conflict.
57% of companies maintained stable business activities throughout the fighting, while an impressive 21% expanded their operations in Israel. IATI said this figure "indicates continued confidence in local activity and the Israeli ecosystem even under conditions of uncertainty."
Another 22% of companies reported damage to their business activity during the war. The conflict began on October 7, 2023, triggered by a Hamas raid into Israel, and a U.S.-led ceasefire deal was reached two months ago.
"Even during the difficult war, the Israeli high-tech industry, including the global companies operating in Israel, once again proved its resilience and its ability to lead in innovation and creativity," stated Rubinstein. She added, "We work tirelessly to ensure that Israel continues to be an attractive hub for the activity of multinational companies."
A Call for Government Action
The report concludes with a cautionary note for policymakers. IATI emphasized that "without active steps by the state to create regulatory and geopolitical stability, there is concern about gradual erosion in the stability of the local ecosystem." The balance between demonstrated resilience and the emerging pressures of talent drain and investment scrutiny will be critical for Israel's economic future.
