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The Israel High Tech Industry

The Israel High Tech Industry. Elisha Yanay Sr. VP Motorola Inc GM Motorola Israel former Chairman Israel Association of Electronics and Software Industries (IAESI) NOV 26 2008. • Population: 7.3 M • Households: 1.8 M • Urban Population: 91.5% • Area - grand total 22,145 sq. km

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The Israel High Tech Industry

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  1. The Israel High Tech Industry Elisha Yanay Sr. VP Motorola Inc GM Motorola Israel former Chairman Israel Association of Electronics and Software Industries (IAESI) NOV 26 2008

  2. • Population: 7.3 M • • Households: 1.8 M • • Urban Population: 91.5% • • Area - grand total 22,145 sq. km • • GDP(ppp): US $ ~$195,308m • • 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 (BB): 1.5M) ISRAEL SIZE

  3. ISRAEL ELECTRONICS & SOFTWARE INDUSTRIESSALES & EXPORT (M$) $40Bn

  4. Medical Aerospace & Defence Communications Computer Hardware Industrial Consumer Aftercare Security Applications Semiconductor Transport

  5. ISRAEL ELECTRONICS & INFORMATION INDUSTRIES 2007 - 20,700 M$ Medical Systems Civilian Comm. & Telecomm. 8.8% 22.9% Software 23.7% 13.4% 13.4% 17.8% Components Defense Systems Industrial Equipment

  6. TELECOMMUNICATIONS EQUIPMENT • 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 23% CHECKPOINT SCOPUS OPTIBASE ZORAN TELRAD ECI TADIRAN RAD GILAT MOTOROLA ALVARION etc..

  7. MAJOR MILITARY SYSTEMS • 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 13.7% ELBIT IAI ELTA ELISRA MAGAL NICE TADIRAN RAFAEL AERONAUTICS BVR etc,…

  8. MAJOR INDUSTRIAL EQUIPMENT • Computerized Production Equipment • Computerized Control Systems • Test Equipment • Training and Education Systems • Consumer Products • Security Equipment 13..4% Kodak-CREO Degem MER Group LIPMAN-Verisign M-Systems NDS ORBOTECH RAPAK VISONIC CROW KP electronics Motorola Magal etc…

  9. MAJOR MEDICAL EQUIPMENT • Imaging and Diagnostic Equipment • Surgical and Treatment Equipment • Monitoring Systems 8,8% ELRON Given Imaging Lumenis Philips CADENT BioView Algotec GE Rimed Oridion etc…

  10. ELECTRONIC COMPONENTS • 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 13,4 % Eltek NDS Vishay Intel Freescale Texas Instrument Zoran DSP group Analog Devices etc..

  11. SOFTWARE • INTERNET • MULTIMEDIA • SOFTWARE – PRODUCTS • SOFTWARE – TURNKEY PROJECTS • SOFTWARE - SUBCONTRACTING 23.7% AudioCodes BVR CyOptics ECI Checkpoint IBM Formula Radware Comverse Amdocs etc..

  12. ISRAEL ELECTRONICS & INFORMATION INDUSTRIES 2006 - 18,700 M$ 36% 39% EUROPE USA 5% 20% ROW ASIA

  13. The new challenge to 2010 $8,6T X2 $2,7T X2 ?? 2017 2003 $40B $11B 2017 2003 We have the human resources necessary 2003 2017 The Challenge $21B 2007

  14. HIGHER EDUCATION IN ISRAELELECTRICAL & COMPUTER ENGINEERING & COMPUTER SCIENCES

  15. 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%

  16. Foreign Investments in Israel

  17. Foreign Investment in Israel 2006/7 4,000$M 4,500$M 1,500$M 800$M 300$M 150$M 150$M 140$M 90$M

  18. Foreign Investment in Israel 2006/7 90$M 76$M Med Impuls 50$M 40$M 12$M

  19. Foreign Investment in Israel 2006/7 50$M 75$M 100$M 54$M 245$M

  20. Largest Recent M&A Transactions Of Israeli Companies Israel continues to attract leading US corporations, looking for established small/mid-cap companies with superior technology and a niche market. Adjusted Adjusted Date Transaction Revenue Announced Target Name Buyer Business Description Size ($m)(1) Multiple(1,2) 7/25/2006 Mercury Interactive HP Business technology optimization solutions $4,500.0 5.7x 5/5/2006 Precision carbide metal working tool provider 2,500.0 2.8x Iscar Berkshire Hathaway 7/31/2006 M-Systems SanDisk Corp. Data storage products 1,550.0 1.9x 3/17/2005 Agis Industries Perrigo Generic pharmaceutical product provider 818.0 2.2x 2/12/2007 Witness Systems Verint Systems Workforce optimization software provider 781.8 3.8x 4/10/2006 Lipman Electronic Engineering VeriFone Holdings Online payment solutions 660.5 2.8x 7/18/2006 Cramer Systems Group Amdocs Operational support systems software 375.0 3.8x 4/4/2006 System-on-a-chip solutions 300.0 N.A. Passave PMC Sierra 4/18/2006 Digital commerce software 275.0 6.5x Qpass Amdocs 12/21/2006 Developer, manufacturer and marketer of implatable devices 240.0 N.A. Disc-O-Tech Medical Technologies Kyphon 8/11/2005 Wide-format printer manufacturers 230.0 1.6x Scitex Vision HP 1/13/2005 Provides software used to verify electronic system designs 229.0 4.4x Verisity Cadence 1/4/2005 Manufacturer of process management software 212.8 1.9x Tecnomatix Technologies UGS 4/28/2006 Workforce and performance management software 200.0 N.A. Tekelec (IEX Corp) NICE Systems 10/24/2006 Microsemi Integrated circuit provider for ethernet power implentation 182.8 5.4x PowerDSine 4/10/2006 Voice and video telecommunication solutions 167.0 3.3x NetCentrex Comverse Technology Inc 11/8/2006 Network Appliance Software developer for enterprise application 160.0 53.3x Topio 7/11/2006 ColBar LifeScience Johnson & Johnson Biosurgical products 159.0 N.A. 5/9/2006 Enterprise data protection solutions 153.0 N.A. Kashya EMC 3/27/2006 Problem resolution application software 150.0 6.0x Identify Software BMC Software 3/17/2006 Endoscopic solutions 150.0 N.A. Sightline Technologies Stryker Corp. 2/9/2005 Developer of system-on-a-chip solutions 145.1 N.A. Modem Art Agere Systems 12/5/2005 Online security provider 145.0 12.6x Cyota RSA 11/28/2006 Communications software for network operators 139.0 5.6x FolloWap Neustar 9/26/2006 Gteko Technologies Microsoft IT and enterprise software 110.0 6.1x 7/26/2005 Intelligent network and services provider 109.5 N.A. Sheer Networks Cisco Systems 1/9/2006 Application software 105.0 N.A. Systinet Mercury Interactive Corp. 7/12/2006 Uri-Dent Denstsply International Dental crowns providers 100.0 N.A. 2/25/2005 A fabless semiconductor company 100.0 N.A. Oplus Technologies Intel Total $15Bn 11 • Transaction size and multiples include target company cash and debt when avaialble. • Adjusted Revenue multiples based on TTM value. • Sources include Jefferies Broadview estimates, IVC Resource Center, Capital IQ and selected press releases.

  21. Major Multinational Companies with a Design Center in Israel

  22. Some of Israel’s Visible Companies 23

  23. FOREIGN ELECTRONIC SUBSIDIARIES IN ISRAEL (PARTIAL LIST) * Design & MFG • Berkshire • Alcatel Lucent • Verifone* • Kodak* • Nortel • SanDisk • EMC • Stryker • TA associates • Google • Xerox • Sun • CA • Microsemi • AMS • Pricer • EPIX • Etc… • 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. • Astronautics • Sanmina-SCI*

  24. 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." $4.1 billion !

  25. CRAIG BART: former Intel CEO ( visiting Israel ) • “Apart from the 6,000 jobs that we have provided here, in my opinion the contribution to Israel lies in the fact that Intel has attracted other companies to invest in Israel and to create an entrepreneurial environment. Globally speaking, Israel is in 3rd place in terms of IP and is a very good place for opening businesses. The level of education in Israel has helped us expand. Israel’s ability to supply very good scientists has helped us, and the government’s positive attitude has helped us attract investments.”

  26. Ed Zander, Motorola CEO, visit to Israel • -----Original Message-----From: Zander Ed-AEZ111 Sent: Sunday, November 14, 2004 10:57 PMTo: Yanay Elisha-BCMS54; Nottenburg Richard-arn021Cc: Brown Greg-CGB025Subject: RE: Your visit to IsraelElisha- 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

  27. Bill Gates, 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.

  28. "There are some fabulous, extraordinary success stories of technology companies here in Israel.” • Ellison had specific advice for Israeli firms, saying that the country’s technology sector has matured to the point that it needs to begin looking to cheaper sources of research services.

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  30. Great talentdriving Israel ’s success THANK YOU.

  31. Israel Is The Leader Among Non US Countries Listed on NASDAQ • Israel maintains the largest number of companies on NASDAQ • Among these countries, Israeli companies accounted for 40% of IPOs on NASDAQ in 2006. • Technology remains the dominant segment Recent Israeli NASDAQ IPOs 71 Israel 59 Canada 10 U.K. 9 Netherlands 8 Hong Kong 8 Japan 7 Singapore 6 France 5 S. Korea 3 India 2 Taiwan 2 Germany 0 10 20 30 40 50 60 70 80 Number of Companies Listed on NASDAQ Source: NASDAQ as of September 2007. 18

  32. (2006)

  33. What do we need to continue our success? • Excel in our education – aspire to being the best in the world • Keep raising the bar in education • Teach innovation and creativity • Strengthen partnerships between academia and industry • Support sophisticated, small ( 20-50 $M) industries – if you want to be large, gather together many small… • Government support should match or even exceed other countries’ incentive plans • $ - Shekel challenge • Keep pushing!

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