High-Tech Project
“Engineers from the Periphery”
Proposal for a national undertaking in Israel
RAD Group
Presented by:
Yehuda Zisapel
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: $300K
• High-Tech activity primarily in the center of the country
Result: The country center becomes more wealthy and the
socio-economic gap widens
Engineers from the Periphery Slide 2
Sales of Electronics and Software
Products in Israel, 2007
M$ 20,000
18,000
16,700
5 480
4 630
2 300
10 870
2 400
16 000
14 200
13 400
12 250
13 000
9 130
1 935
2 030
3 970
2000
3 375
4000
4,596
1 801
6000
2 795
Export
2 210
6,000
5,310
2 320
6,840
6 700
8000
2 280
7,800
2 400
9,980
8 050
10,000
2 330
10,380
2 300
11,530
12,000
13,040 13,170
10 740
14,000
2 500
2 500
14,750
2 500
16,000
Domestic
15,800
15,500
2 700
18,700
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Engineers from the Periphery Slide 3
High-Tech is the country’s Growth
Engine
Market
Money
Capital
Human
Capital
Engineers from the Periphery Slide 4
Technological Markets on an
upward trend
US-based Information Technology as a Percentage of Nominal Business Capital Equipment Spending
Source: Bureau of Economic Analysis, Morgan Stanley Technology Research
• Israel now has a 1% market share of the worldwide
technological market
Conclusion: No market constraint regarding growth potential
Engineers from the Periphery Slide 5
USA vs. Israel: Total Capital Invested in
Venture-Backed Companies
US$ Billion
Source: Ernst & Young; VentureOne
Engineers from the Periphery Slide 6
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 create
investment opportunities is the Engine of High-Tech
Engineers from the Periphery Slide 7
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 8
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 9
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 10
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
Investment in $1,000
1
2
3
4
5
16,500
33,000
49,500
66,000
82,500
Engineers from the Periphery Slide 11
Contribution of a High Tech Engineer to
the Employment Market
№ of Workplaces
5
4
3
2
1
1
2
3
№ of Years in
Employment
4
Years in High Tech
1
2
3
4
№ of Workplaces
1
2
4
5
Engineers from the Periphery Slide 12
Effect of High-Tech on Production &
Employment Growth
Additional Workers
in High Tech
18000
Additional Production,
Dollars, $M
4500
Number of Engineers
Additional Production, Dollars, $M
15000
3750
12000
3000
9000
2250
6000
1500
3000
750
6
(1)
7
(2)
8
(3)
9
(4)
10
(5)
№ Years of Program
(№ Years in Industry)
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
Engineers from the Periphery Slide 13
Effect of the Program on Export
Growth
Accumulated
Production Increase, $M
4416
4195
4000
3312
3146
3146
3000
2360
1932
2000
1835
1377
828
1000
787
590
176 167
125,4
0
6
Production
7
Export (95%)
8
9
10
№ Years in Program
Balance of Payments Improvement (75%)
Engineers from the Periphery Slide 14
Effect of the Program on
Employment Growth
Total Additional
Workers in Economy
105600
100000
78800
80000
86400
60000
46200
64800
40000
19800
20000
6600
0
5400
1200
6
37800
16200
3600
7
High Tech Workers
8400
8
14400
9
19200
10
№ Years in Program
Non-High Tech Workers (4.5:1)
Engineers from the Periphery Slide 15
Return on Investment
Income Tax
Payments, $M
1200
1000
800
600
400
200
6
7
8
9
10
№ of Years in
the Program
№ Years in the Program
6
7
8
9
10
Income Tax Payments, $M
44
206
642
828
1101
Engineers from the Periphery Slide 16
Socio-Economic Gap in Israel
• Present Growth of High-Tech Industry –
center of the country
• Effect on Socio-Economic Gap – it widens
Periphery
Center
Engineers from the Periphery Slide 17
Solution to Socio-Economic Gap
Engineers from the Periphery
• Development of High-Tech in the periphery will aid in
decreasing the socio-economic gap in Israel
Periphery
Center
Engineers from the Periphery Slide 18
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 19
thank you
for your attention
Engineers from the Periphery Slide 20