The High-Tech Industry And The Israeli Economy 2005

The High-Tech Industry And The Israeli Economy 2005 Presented by Eran Davidson President and CEO Hasso Plattner Ventures

Israel – General Background • Area: 20, 770 sq km (the world’s 100 th smallest country) • Population – 6. 8 million (% 0. 01 of the world!) • Gross Domestic Product (GDP) $120 billion ($17, 500 per capita – exceeding that of UK) • GDP Growth Rate: 5. 1% • Exports : $51. 5 billion • Imports : $52 billion

ISRAELI GEOGRAPHY Israel and the Mediterranean

Facts & Figures Main Economic Indicators Criteria 2002 2003 2004 2005 GDP (current prices in B$) 104. 2 110. 4 117. 6 124 GDP Real Growth Rate (%) -0. 7% 1. 3% 4. 3% 5. 1% 15. 9 16. 5 17. 3 17. 9 GDP per Capita Growth Rate (%) -2. 7% -0. 5% 2. 5% 3. 2% Exports of Goods & Services (B$) 37. 0 38. 4 50. 4 56. 7 Imports of Goods & Services (B$) 45. 6 44. 3 57. 7 57 Unemployment Rate (%) 10. 3% 10. 7% 10. 4% 9. 1% Inflation Rate ( CPI, end of year) 6. 5% -1. 9% 1. 2% 2. 8% GDP per Capita (current prices, M$)

And this is achieved in a country with the highest expenditure on defense and security issues (in absolute numbers per capita), and not natural resources beside brain power

Israel’s Economic Characteristics Economic Stability Constant Growth Political Stability Fast Development of Technology & Hi-Tech Industries Human Capital

Israel’s Economy – Main Characteristics Export Oriented Industry • Entrepreneurial Culture • Supportive Environment for Business • Investment & R&D Incentives

About Palm Trees

Some interesting facts about Israel • The Middle East has been growing date palms for centuries. The average tree is about 20 feet tall and yields about 38 pounds of dates per year • Israel date trees are yielding 400 pounds per year and are short enough to be harvested from the ground

High tech samples from Israel • The Cell Phone was developed in Israel by Israelis working in Motorola, which has its largest development center in Israel • Microsoft, Intel and Cisco built their only R&D facilities outside the US in Israel • SAP built their only R&D facilities outside the US and Germany in Israel, with 700 scientists • The Pentium Chip in your PC was most likely produced in Israel

Israeli high tech innovations • Voice mail technology was developed in Israel (Comverse) • Instant Messaging technology was developed in Israel (“ICQ”, now AOL) • Most of Windows NT and XP was developed in Israel by Microsoft Israel • The Pentium MMX, Pentium 4 and Centrino Processors were developed in Israel

Medical developments • Israel “Given Imaging” developed the first ingestible Video Camera, so small it fits inside a pill. Used to view the small intestine from inside, to diagnose and monitor cancer and digestive disorders. • Israeli scientists developed the first fully computerized, no-radiation, diagnostic instrumentation to breast cancer • A new acne treatment was developed in Israel – the Clear Light device produces a high-density, EV-light free, narrow band that causes acne bacteria to self destruct, without damaging surrounding skin

Alternative Energy, environment… • An Israeli company was the first to develop and install a large scale solar powered and fully functional electricity generating plant, in Southern California Mojave desert. • Israel is the only country in the world that entered the 21 st century with a net gain in its number of trees, made more remarkable when considering it was achieved in an area regarded mainly desert

The Human Factor • In absolute terms Israel has the largest number of startup companies worldwide (second after the US) – well over 3, 000. • Israel produces more scientific papers per capita than any other nation by a large margin – 109 per 10, 000 people • Israelis file more patents per capita than any other nation worldwide • Israel has the highest ratio of University degrees to the population in the world

Jaffa Oranges vs Hi-Tech 8800 7800 6800 exports ($millions) 4400 2400 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 0 Citrus Hi-Tech

ISRAEL ELECTRONICS & INFORMATION INDUSTRIES SALES & EXPORT (M$) DOMESTIC EXPORT 16, 000 15, 000 14, 000 13, 000 12, 000 11, 000 10, 000 9, 000 8, 000 7, 000 6, 000 5, 000 4, 000 , 3 000 2, 000 1, 00 00 15, 800 15, 500 14, 750 13, 040 13, 170 11, 530 10, 380 9, 980 7, 800 6, 840 5, 310 4, 596 6, 000 16, 700

Start-ups – The emerging economy force Israel is one of the largest world centers for start-up enterprise, with +3, 000 start-ups. Innovative Technology-intensive Representing technology breakthrough

Industry Start-Ups – The Emerging Economic Force “ Israel Enjoys the Highest Concentration of High-Tech Companies Outside of the Silicon Valley Robert Greifeld President & CEO NASDAQ 2004

The Driving Forces Israel’s unique advantage Government commitment for industrial growth, R&D Highly skilled workforce High concentration of VCs and capital markets Transition from Military to Civilian Markets I. D. F. – Entrepreneurial Spirit

Educational Levels Israel has the highest ratio of University degrees to the population in the world Israel has the highest percentage in the world in PC’s per capita 40% of the recent immigrant opulation hold academic degree

Facts & Figures Core Technology-Innovating Economies, 2003 Israel Ranks 4 Out of 103 Countries 1 2 3 4 5 6 7 8 9 10 Source: The Global Competitiveness Report 2004 -2005

Doing Business In Israel Recent M&A Israeli Company Technology Acquirer Sum Time Terayon Communication Systems Inc. Communications Aris $345 M 09/2005 Scitex Vision Ltd. Printing HP $230 M 08/2005 Sheer Networks Ltd Communications Cisco $122 M 07/2005 Siliquent Technologies Inc. Communications Broadcom $84 M 07/2005 Life Sciences West Pharmaceutical Services Inc. $42 M 07/2005 Medcon Telemedicine Technology Ltd. Life Sciences Mc. Kesson Corp. Life Sciences $105 M 06/2005 Shopping. com Internet e. Bay $620 M 06/2005 Medimop Medical Projects Ltd.

Doing Business In Israel Recent M&A (cont. ) Israeli Company Technology Acquirer Sum Time Impulse Dynamics Healthcare Johnson & Johnson 80 M$ 05/2005 Siliquent Semiconductors Fabless Broadcom ~85 M$ 05/2005 Tecnomatix Software UGS Corp 228 M$ 04/2005 Kagoor Voiceover Internet 68 M$ 03/2005 Savient Biopharmaceutical 80 M$ 03/2005 OREX Radiography Medical Equipment Kodak 51 M$ 03/2005 Native Networks Communication Alcatel ~50 M$ 03/2005 Oplus Technologies Processors for Digital Display Devices Intel 100 M$ 03/2005 Modem-Art Semiconductors Fabless Agere Systems 150 M$ 02/2005 Juniper Networks Ferring Holding SA

American Companies Invested in Israel • Microsoft • Pratt & Whitney • AOL time Warner • Intel • IBM • Boeing Enterprises • Cisco Systems • GE • Lucent • 3 Com • Hewlett Packard • Merrill Lynch • Motorola • Sun Microsystems

European Companies Invested in Israel • Siemens • Daimler. Chrysler • Volvo • Cable & Wireless • Baan • Volkswagen • Deutsche Telekom • L’Oreal • British Telecom • Danone • Ares Sereno • Unilever

Asian Companies Invested in Israel • • Samsung Electronics Daewoo Nomura Hutchison Telecomm. Nissho Iwai LG Group New Margine (VC) • • Sony Toyo Ink Hyundai Acer Computers Sumitomo Trading Fuji Honda

THE ADVANTAGES OF DOING BUSINESS IN ISRAEL Technology Leadership “Israel has a spectacular people, great energy, unique intelligence – an ability to solve problems” Christopher Galvin, CEO , Motorola

Doing Business In Israel Technology Leadership “ Thanks to quality education, Israel is one of the most advanced countries in the world. … Israel is advancing in high-tech even more than other developed countries ” Bill Gates, CEO Microsoft, World Economic Forum, Davos, January 2000

Doing Business In Israel Technology Leadership (cont. ) “ Israel’s market is relatively large and sophisticated, it boasts the world’s greatest per capita number of engineers, scientists and doctors. The Israeli economy is simply a reflection of the country’s greatest natural resource which is the brainpower and ingenuity of its citizens Mike Zafirovski , COO, Motorola 2003 ”

Conclusion • Outstanding Human Resources • Global Economic Orientation • Stability • Modern Hi-Tech Infrastructure • Supportive Environment

Eran Davidson