The Israel High Tech Industry

ISRAEL • Population: 7.3 M • Households: 1.8 M • Urban Population: 91.5% • Area - grand total 22,145 sq. km • GDP Per Capita: US $ K$31,767

• Unemployment 6.8% • Fixed line Telephone Subs – 2.9M • Mobile – 7.7M (106% penetration) • Internet Users: 2.5M

Israel Is The Leader Among Non US Countries Listed on NASDAQ

Number of Companies Listed on NASDAQ

71

59

10

9

8

8

7

6

5

3

2

2Germany

Taiwan

India

S. Korea

France

Singapore

Japan

Hong Kong

Netherlands

U.K.

Canada

Israel

0 10 20 30 40 50 60 70 80

Source: NASDAQ as of September 2007.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Perce

ntage

of G

DP

Proportionately, Israel spends more money on R&D than any other country

in the world

Engineers graduates per year in 2006

•Israel 8000 engineers /year (pop 7.2M) 0.11%•France 30 000 engineers/year, (pop 64M) 0.046%•UK 25 000 engineers/year (pop 60M) 0.04%•USA 74 000 engineers/ year (pop 300M) 0.024%•China 600 000 engineers/year (pop 1.3Bn) 0.0046%•India 400 000 engineers/year (pop 1.1Bn) 0.036%•Japan 90 000 engineers/year (pop 127M) 0.07%

• The government is hugely supportive of Israel’s hi-tech sector and has played a crucial role in its development.

• Its main instrument of innovation is the Office of the Chief Scientist

• The most important government initiatives include:

• The Yozma Program for jump-starting the venture capital sector

• Israel-US BIRD Foundation - has provided $245M to 740 joint R&D projects

- products developed have generated sales of over $8B

• The R&D Fund

• The Technological Incubators Program

• The Magnet Program for creating consortia of industry and academia

The Role of the Government

The Role of the Government

Favorable Regulatory Environment

Strict international standards for protection of trademarks, patents and intellectual property of all kinds

Investor friendly

comprehensive legal protection of foreign companies

an advanced banking and financial sector

favorable tax treatment for foreign investors

worldwide taxation treaties and free trade agreements

Foreign Investments in Israel

Foreign Investment in Israel 2006/7

4,000$M

800$M

300$M

150$M

150$M

140$M

90$M

4,500$M

1,500$M

Foreign Investment in Israel 2006/7

90$M

76$M

Med Impuls50$M

40$M

12$M

245$M

54$M

100$M

75$M

Foreign Investment in Israel 2006/7

50$M

FOREIGN ELECTRONIC SUBSIDIARIES IN ISRAEL (PARTIAL LIST)

FOREIGN ELECTRONIC SUBSIDIARIES IN ISRAEL (PARTIAL LIST)

Intel * Microsoft IBM Sun Microsystems Cisco 3 Com HP* Texas Instruments* National S.C ST Microelectronics Infineon Analog Devices Vishay* AVX (Kyocera) General Electric Philips Medical Flextronics*

Motorola* Lucent Technologies Avaya Nortel* Siemens Alcatel Philips Ericsson Nokia ADC Qualcomm Applied Materials KLA - Tencor Kulicke & Soffa* BAE Systems Ind. AstronauticsSanmina-SCI*

Berkshire Alcatel Lucent Verifone*Kodak* Nortel SanDisk EMC Stryker TA associates Google Xerox Sun CA Microsemi AMS PricerEPIXEtc…

* Design & MFG

VC in Israel

Israel’s Hi-tech

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

17,7

002,

900

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Sales

Export

ISRAEL ELECTRONICS & SOFTWARE INDUSTRIES SALES & EXPORT (M$)

ISRAEL ELECTRONICS & INFORMATION INDUSTRIES 2006 - 18,700 M$ISRAEL ELECTRONICS & INFORMATION INDUSTRIES 2006 - 18,700 M$

36% 39%

5% 20%

Rest of the

world ASIA

USAEUROPE

20

Aerospace & Defence

IndustrialConsumer

CommunicationsComputer Hardware

Security Applications

Semiconductor Transport

Aftercare

Medical

ISRAEL ELECTRONICS & INFORMATION INDUSTRIES2007 - 20,700 M$ISRAEL ELECTRONICS & INFORMATION INDUSTRIES2007 - 20,700 M$

Civilian Comm. & Telecomm.

Components

IndustrialEquipment

22.9%

13.4%17.8%

13.4%

DefenseSystems

23.7%Software

8.8%

MedicalSystems

Fiberoptic & Photonic Systems SDH, SONET Access – XDSL ATM, Frame Relay IP Networks – Voice, Video, Data, Multimedia Routers, Load balancing Test Equipment, Quality Monitoring of Networks 3G Applications Home Networks Storage Area Networks Wireless Local Loop, Microwave VPN, Firewalls WiMAX Video-Compression, Video-Conferencing & Video Networks

TELECOMMUNICATIONS EQUIPMENTTELECOMMUNICATIONS EQUIPMENT

23%

CHECKPOINTSCOPUS

OPTIBASEZORANTELRAD

ECITADIRAN

RADGILAT

MOTOROLAALVARION

etc..

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 Avionic Equipment Platforms (Aircraft, Tanks…) Retrofit and Upgrading Navigation and Positioning Equipment Tactical Airborne, Naval and Ground Communications Sights and Night Vision Simulation and Training Equipment

MAJOR MILITARY SYSTEMSMAJOR MILITARY SYSTEMS

13.7%

ELBITIAI

ELTAELISRAMAGAL

NICETADIRANRAFAEL

AERONAUTICSBVR

etc,…

Computerized Production Equipment

Computerized Control Systems

Test Equipment

Training and Education Systems

Consumer Products

Security Equipment

MAJOR INDUSTRIAL EQUIPMENTMAJOR INDUSTRIAL EQUIPMENT

13..4%

Kodak-CREODegem

MER GroupLIPMAN-Verisign

M-SystemsNDS

ORBOTECHRAPAK

VISONICCROW

KP electronicsMotorola

Magaletc…

Imaging and Diagnostic Equipment

Surgical and Treatment Equipment

Monitoring Systems

MAJOR MEDICAL EQUIPMENTMAJOR MEDICAL EQUIPMENT

8,8%

ELRONGiven Imaging

LumenisPhilips

CADENTBioViewAlgotec

GERimedOridionetc…

SEMICONDUCTORS Design Centers Manufacturing Facilities PASSIVE COMPONENTS Resistors & Networks Capacitors Transformers Batteries P.C. Boards ACTIVE COMPONENTS Tubes Power Supplies Oscillators Detectors Microelectronic Components Microwave Components

ELECTRONIC COMPONENTSELECTRONIC COMPONENTS

13,4 %

EltekNDS

VishayIntel

FreescaleTexas Instrument

ZoranDSP group

Analog Devicesetc..

INTERNET

MULTIMEDIA

SOFTWARE – PRODUCTS

SOFTWARE – TURNKEY PROJECTS

SOFTWARE - SUBCONTRACTING

SOFTWARESOFTWARE

23.7%

AudioCodesBVR

CyOpticsECI

CheckpointIBM

FormulaRadware

ComverseAmdocs

etc..