High-tech growth in 2005 will be slower than its 15% growth in 2004. Yanai predicts that high tech will grow 10% in 2006 to $18.2 billion, thanks to the global recovery and successful penetration of international markets. 85% of Israel's high-tech sales are from exports.
Israeli high-tech companies acquired fifteen foreign companies in 2005 for $900 million and ten Israeli companies for $150 million. Foreign companies acquired ten Israeli companies for $600 million.
Exports of medical, communications and electronics equipment and software rose in 2005, but exports of electronic components fell by 14%. Yanai attributes most of the decline in the latter item to Intel's (Nasdaq:INTC) upgrade of its Fab 18 in Kiryat Gat. When the upgrade is completed, and with the establishment of Intel's new Fab 28, Yanai predicts, "We'll see strong and rapid growth in an excellent field that will boost all exports by the components sector."
Defense exports accounted for 16% of total high-tech exports this year. Defense exports will total $2.3 billion this year, the same as in 2004. Civilian high-tech exports account for 84% of high-tech exports this year - $11.9 billion, an increase of 7%. Domestic sales will total $2.4 billion.
Yanai said the IAEI, Office of the Chief Scientist, Israel Venture Association were planning to double Israel's high-tech exports within five years. The plan proposes encouraging employment in outlying areas, with the government subsidizing 15% of salaries. This aid will be awarded by tenders, in which the main criterion will be the level of employees' salaries.
Yanai also expects that the government will boost incentives offered by Chief Scientist, improve technology education, encourage Israelis working for high-tech companies overseas to return home, and help cut enterprises' labor costs, in order to prevent job flight to Asia.
Israel's high-tech sector will grow 6% this year to $16.6 billion, estimates Motorola Israel general manager Elisha Yanai. Mr. Yanai also serves as chairman of the Israel Association of Electronics and Information Industries (IAEI). He expects that high tech will add 2,300 people this year, boosting employment by 4% to 57,200.