www iaesi org il IAESI Israel Association of

www. iaesi. org. il IAESI Israel Association of Electronics & Software Industries ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 1

ISRAEL IN A GLANCE - 2006 • Population: 7, 707, 000 • Households: 1. 8 M • Urban Population: 91. 5% • Area - grand total 22, 145 sq. km • GDP: US $ ~140. 5 B • GDP Per Capita: US $ ~19. 9 K • Fixed line – 3, 200, 000 • Mobile – 7, 757, 000 subscribers • Internet – Broadband subscribers – 1, 250, 000 ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 2

THE ELECTRONIC INDUSTRIES IN ISRAEL Beginning: 1967 - after Military Embargo Following the Six Day War Pattern of Growth: Maintenance Subcontracting Build to Print Build to Specifications Own R&D Civilian Equipment: Spin-off from Defense Products & Technologies Multinationals: R&D Center Production ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 3

ISRAEL ELECTRONICS & SOFTWARE INDUSTRIES SALES & EXPORT (M$) 20, 000 18, 700 18, 000 16, 700 15, 800 15, 500 16, 000 14, 750 13, 040 13, 170 14, 000 11, 530 12, 000 10, 380 9, 980 10, 000 7, 800 DOMESTIC 8000 6, 840 5, 310 6, 000 4, 596 EXPORT 4000 2000 0 ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 4

ISRAEL ELECTRONICS & SOFTWARE INDUSTRIES EMPLOYMENT AND MANPOWER STRUCTURE EMPLOYEES 66, 300 70, 000 62, 000 60, 000 50, 000 39, 500 42, 700 45, 000 47, 700 50, 500 53, 400 56, 200 58, 800 54, 800 57, 200 59, 500 62, 000 53, 500 40, 000 30, 000 20, 000 10, 000 0 ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 5

ISRAEL ELECTRONICS & SOFTWARE INDUSTRIES EXPORTS BY INDUSTRY GROUP 2006 – 16, 000 M$ Medical Systems Civilian Comm. & Telecomm. 22. 9% 8. 8% Software 23. 7% 13. 4% Components 17. 8% Industrial Equipment 13. 4% Defense Systems ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 6

TELECOMMUNICATIONS EQUIPMENT Fiberoptic & Photonic Systems n SDH, SONET n Access – XDSL n ATM, Frame Relay n IP Networks – Voice, Video, Data, Multimedia n Routers, Load balancing n 22. 9% n Test Equipment, Quality Monitoring of Networks n 3 G Applications n Home Networks n Storage Area Networks n Wireless Local Loop, Microwave n VPN, Firewalls n Video-Compression, Video-Conferencing & Video Networks ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 7

MAJOR MILITARY SYSTEMES Missiles and Guided Weapons Anti Aircraft and Anti-Missiles Systems Radars - Airborne, Naval, Ground EW Equipment Fire Control Systems Command, Control, Communications and Intelligence Systems n Avionic Equipment n Aircraft Retrofit and Upgrading n Navigation and Positioning Equipment n Tactical Airborne, Naval and Ground Communications n Sights and Night Vision n Simulation and Training Equipment n n n ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 13. 4% 8

MAJOR INDUSTRIAL EQUIPMENT n Computerized Production Equipment n Computerized Control Systems n Test Equipment n Training and Education Systems n Consumer Products n Security Equipment ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 17. 8% 9

MAJOR MEDICAL EQUIPMENT n Imaging and Diagnostic Equipment n Surgical and Treatment Equipment 8. 8% n Monitoring Systems ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 10

ELECTRONIC COMPONENTS n SEMICONDUCTORS Design Centers n Manufacturing Facilities n PASSIVE COMPONENTS n Resistors & Networks n Capacitors n Transformers n Batteries n P. C. Boards n ACTIVE COMPONENTS n Tubes n Power Supplies n Oscillators n Detectors n Microelectronic Components n Microwave Components n ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 13. 4% 11

SOFTWARE n INTERNET n MULTIMEDIA n SOFTWARE – PRODUCTS 23. 7% n SOFTWARE – TURNKEY PROJECTS n SOFTWARE - SUBCONTRACTING ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 12

ISRAEL ELECTRONICS & SOFTWARE INDUSTRIES EXPORTS BY REGION 2006 – 16, 000 M$ EUROPE USA 35% 5% 38% 22% ROW ASIA ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 13

HIGH-TECH CHARACTERISTICS IN ISRAEL Strengths: • Entrepreneurial Spirit • Highly Qualified Scientists & Engineers • Proven Track Record Engines: • Government Support (R&D, Investment) • Venture Capital Results: • Strong R&D • New Technologies and Applications • Numerous New Start-ups • International Involvement (Acquisitions & Subsidiaries) ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 14

Scientists & Engineers per 10, 000 pp ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 15

R&D in Electronics and ICT as % of GDP Source: IVC Research Center, Venfure. One ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 16

Israel R&D in first place with 4. 7% of GDP * Total annual new bachelor’s degree or higher Business Week Oct 11 2004 ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 17

START-UPS Main Fields of Activities: } n Telecommunications n Information Technologies n Semiconductors for… } Fabless n Medical } New Applications to Reduce Health-Care Costs Mobile, 3 G, Broadband, Wi Fi, Internet, ile Data Comm, Security, Wi Max Conversion of Military Technologies to Civilian Products. ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 18

Highlights in Israeli Innovation Pentium (Intel) n Centrino (Intel) n Telecom Billing (Amdocs) n Call Center Logging (Nice/Verint) n Voice Mail (Comverse) n Instant Messaging (ICQ, Ubique) n PC Board Inspection (Orbotech) n Vo. IP (Vocaltec) n Two-bit per cell Flash Memory (Saifun) n Disk on Key (M-systems) n Firewall (Checkpoint) n SW Performance (Mercury Interactive) n Anti. Virus (Alladin, Commtouch…) n Virtual Colonoscopy (Given Imaging) n ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 19

FOREIGN ELECTRONIC SUBSIDIARIES IN ISRAEL (PARTIAL LIST) Intel n Microsoft n IBM n Sun Microsystems n Cisco n 3 Com n HP n Texas Instruments n National S. C n ST Microelectronics n Infineon n Analog Devices n Vishay n AVX (Kyocera) n General Electric n Philips Medical n Motorola n Lucent Technologies n Avaya n Nortel n Siemens n Alcatel n Philips n Ericsson n Nokia n ADC n Qualcomm n Applied Materials n KLA - Tencor n Kulicke & Soffa n BAE Systems Ind. n Astronautics n ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 20

Foreign Investments in Israel 2006 4, 000$M 4, 500$M 1, 500$M 800$M 300$M 150$M 140$M ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 21

Foreign Investments in Israel 2006 (cont. ) 90$M 76$M 50$M Med Impuls 40$M 12$M ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 22

Bill Gates, the Microsoft CEO, made his first trek to Israel “Considering the density of Israeli start-ups and local successes, Israel is like a bit of Silicon Valley. ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 24

CEO Ed Zander visit to Israel n n -----Original Message----From: Zander Ed-AEZ 111 Sent: Sunday, November 14, 2004 10: 57 PM To: Yanay Elisha-BCMS 54; Nottenburg Richard-arn 021 Cc: Brown Greg-CGB 025 Subject: RE: Your visit to Israel Elisha- I had a great time. You and your team did an outstanding job. I was continually impressed by their knowledge of the business, opportunities and issues and great work ethic. Motorola has a jewel in it it's Israeli operation thanks to you and your senior team. Hope to see you soon. Regards, ed ed@motorola. com 847 -576 -3000 ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 25

Asked how come he chose Israel as his first investment outside America, Buffett's response was: "Some Americans came looking for oil, so they didn't stop in Israel. We came looking for brains, so we did stop in Israel. " ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 26

ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES Thank You More information at our Website: www. iaesi. org. il ISRAEL ASSOCIATION OF ELECTRONICS & SOFTWARE INDUSTRIES - 2007 27