RAD Group

High-Tech Project“Engineers from the

Periphery”

Presented by:

Yehuda Zisapel

Proposal for a national undertaking in Israel

Engineers from the Periphery Slide 2

Contribution of High-Tech to the Israeli Economy

• Over 50% of Israel’s Exports, i.e. $16 B

• 21,300 engineers from a total of 60,000 workers

• Sales per worker: $300K

• High-Tech activity primarily in the center of the country

Result: The country center becomes more wealthy and the socio-economic gap widens

Engineers from the Periphery Slide 3

Export

Domestic

Sales of Electronics and Software Products in Israel, 2007

2 79

51

801

3 37

51

935

3 97

02

030

4 63

02

210

5 48

02

320

6 70

02

280

8 05

02

330

9 13

02

400

13 0

002

500

12 2

502

500

10 7

402

300

10 8

702

300

13 4

002

400

14 2

002

500

16 0

002

700

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

4,5965,310

6,000

6,840

7,800

9,980

10,380

11,530

14,75015,500

13,040 13,170

15,800

16,700

18,700

0

2000

4000

10,000

8000

6000

18,000

16,000

14,000

12,000

20,000M$

Engineers from the Periphery Slide 4

High-Tech is the country’s Growth Engine

Market

MoneyCapital

HumanCapital

Engineers from the Periphery Slide 5

Technological Markets on an upward trend

• Israel now has a 1% market share of the worldwide technological market

Conclusion: No market constraint regarding growth potential

Source: Bureau of Economic Analysis, Morgan Stanley Technology Research

US-based Information Technology as a Percentage of Nominal Business Capital Equipment Spending

Engineers from the Periphery Slide 6

USA vs. Israel: Total Capital Invested in Venture-Backed Companies

US$ Billion

Source: Ernst & Young; VentureOne

Engineers from the Periphery Slide 7

Summary: Conditions enabling the development of High-Tech

Conditions:

• Market – unlimited

• Investment Capital – searches for qualitative technological ideas; also unlimited

Bottleneck:

• Human Capital – shortage of quality manpower and quality education

Quality Human Resources to generate ideas and createinvestment opportunities is the Engine of High-Tech

Engineers from the Periphery Slide 8

Developing Human Capital

• Manpower increase from country center – growth potential: 5%

• Manpower increase from the periphery – growth potential: 100%

Conclusion: Development of High-Tech in the periphery using the Atidim Project as a model

Engineers from the Periphery Slide 9

Atidim Model

• Participants are high school graduates, pre-Army, from the periphery

• Target Population: • Minimum personal attribute qualifications

• “Bagrut” certificate – poor or none

• No chance of acceptance to a college or university

• Project Track:• Preparatory course (“mechina”) of one year

• Conclusion of “mechina” and university entrance exams

• Study in normal university courses

• Track Record:• Student success rate: top 15%

• IDF “Atudah” academic program

Engineers from the Periphery Slide 10

Objective: to adopt “Atidim” model which has proved itself

• Participants:• From the periphery

• IDF veterans

• Preference to combat unit veterans

• Target number of participants: 1500 per year

• University Partnering – Universities which have expressed their willingness to participate:• Technion

• Hebrew University in Jerusalem

• Tel Aviv University

• Ben-Gurion University of the Negev

• Bar Ilan University

Engineers from the Periphery Slide 11

High Tech Project in the Periphery

• Training & qualification of 1500 engineers from the periphery each year

• Immediate budget of $16,500,000 per year to $82,500,000 fixed, after 5 years

• Increase of High-Tech by $10B within 10 years

Critical mass of quality manpower is the Engine of our economy:

Years 1 2 3 4 5

Investment in $1,000 16,500 33,000 49,500 66,000 82,500

Engineers from the Periphery Slide 12

Contribution of a High Tech Engineer to the Employment Market

Years in High Tech 1 2 3 4

№ of Workplaces 1 2 4 5

№ of Workplaces

№ of Years inEmployment

5

3

2

1

1 2 3 4

4

Engineers from the Periphery Slide 13

Effect of High-Tech on Production & Employment Growth

Years of Program 6 7 8 9 10

Years in Industry 1 2 3 4 5

Additional Workers in High Tech 1200 2400 3600 4800 6000

Additional Production, Dollars, $M 1200 3600 8400 14400 19200

№ Years of Program(№ Years in Industry)

3000

6(1)

7(2)

8(3)

9(4)

10(5)

6000

9000

12000

15000

18000Number of Engineers

Additional Production, Dollars, $M

Additional Workers in High Tech

Additional Production, Dollars, $M

750

1500

2250

3000

3750

4500

Engineers from the Periphery Slide 14

Effect of the Program on Export Growth

4416

3312

1932

828

176 167

787

1835

4195

3146

1377

3146

2360

590

125,40

1000

2000

3000

4000

6 7 8 9 10

Production Export (95%) Balance of Payments Improvement (75%)

AccumulatedProduction Increase, $M

№ Years in Program

Engineers from the Periphery Slide 15

Effect of the Program on Employment Growth

840014400 19200

5400

16200

37800

64800

86400

36000

20000

40000

60000

80000

100000

6 7 8 9 10

High Tech Workers Non-High Tech Workers (4.5:1)

№ Years in Program

Total AdditionalWorkers in Economy

6600

19800

46200

78800

105600

1200

Engineers from the Periphery Slide 16

Return on Investment

№ of Years in the Program

200

6 7 8 9 10

400

600

800

1000

1200

Income TaxPayments, $M

№ Years in the Program 6 7 8 9 10

Income Tax Payments, $M 44 206 642 828 1101

Engineers from the Periphery Slide 17

Socio-Economic Gap in Israel

• Present Growth of High-Tech Industry – center of the country

• Effect on Socio-Economic Gap – it widens

Center

Periphery

Engineers from the Periphery Slide 18

Solution to Socio-Economic GapEngineers from the Periphery

• Development of High-Tech in the periphery will aid in decreasing the socio-economic gap in Israel

CenterPeriphery

Engineers from the Periphery Slide 19

Implementation of “High-Tech in the Periphery”

• Execution• Technion Alumni Association & Technion 100 Club

• Financing• Philanthropists/Contributors: First year “mechinah”

• 4 years of study: Bank Loans (Bank Leumi agreement)

Engineers from the Periphery Slide 20

thank youfor your attention