High-tech Sector No Longer Israel's Growth Engine

Sector's output barely outpaces that of economy as a whole.

A high-tech office in Nazareth.
Ofer Vaknin

Israel’s high-tech sector is no longer the growth engine for the economy that it once was, according to data from the Central Bureau of Statistics published Wednesday.

The sector’s output increased only 3.5% last year, to a total of 77.5 billion shekels ($22.2 billion), according to the data, barely outpacing economic growth in Israel as a whole – 3.3%.

The figures relate to the information and communications technology sectors, and following a change in categorization, no longer include research and development. The latter includes many startups and development centers.

The output from high-tech accounted for 12.5% of the country’s output in 2013, down from 14% in 2012. Most of the output from information technology comes from companies that provide services (77%), while only 18% comes from industry.

Last year’s slow growth comes after the sector registered growth of 7% in 2012, versus 3% for the economy as a whole. However, the sector underperformed the economy in the preceding years, with growth of only 1.5% in the high-tech sector for 2011.

Another worrying figure from the CBS data is the continuing decrease in the number of people employed in the sector, known for its high salaries. In 2013, total high-tech employment dropped 2%. Last year, some 190,000 people worked in the sector, compared to 194,000 in 2012 and 192,000 in 2011.

Employees in the field of information technology, a subset of high-tech, accounted for 5% of all employees in Israel in 2013, a similar figure to that from 2012. Most of these jobs were in companies providing services.

The most encouraging figure last year was the increase in information technology exports, which grew 13% over 2012, totaling 70.9 billion shekels.

Total high-tech exports accounted for 21% of Israel’s goods and services exports last year, up slightly from 19% in 2011. Some 79% of the information technology industry’s output – not counting communications services, which are primarily for the local market – was exported. Of the exports, 54% went to Asia and 16% to the United States.

Average salary costs increased 5% last year versus 2012. In the field of information technology, the highest salaries were in the computer production, consumer electronics and optic and magnetic media sectors, where workers earned an average of 34,000 shekels a month. Workers in the field of communications equipment production earned an average of 25,000 shekels a month on average, and those in the fields of programming and computer consulting earned an average of 22,000 shekels a month.