Leading Sectors for US Exports & Investments
Aerospace and Defense
In 2018, Israel spent over $6 billion on defense procurement. About half of this amount was spent in the United States through the U.S. Foreign Military Funding (FMF) Program. $3.2 billion were spent on non FMF funded purchases, sourced primarily in Israel and in the United States. The current U.S. military aid to Israel, covering FY2019 to FY2028 is $38 billion: $33 billion in FMF plus $5 billion in missile defense appropriations. Additional U.S. funding was allocated in 2016 for anti-tunnel capabilities that detect, map, and neutralize underground tunnels.
Israel’s military and commercial activities with the U.S. defense industry are strong and include commercial contracts with major U.S. companies. The local industry is sourcing quality components and sub-systems, presenting export opportunities to U.S. suppliers of high-quality components that can be integrated into Israeli systems.
The country’s defense industry is dominated by four companies: Israel Aerospace Industries (IAI), Rafael Advanced Defense Systems (both parastatals), publicly-owned Elbit Systems and Israel Military Industries (IMI), which was recently acquired by Elbit. The companies have a diverse portfolio of products and services, including space and airborne reconnaissance systems, radar systems, UAVs, avionics and electro-optical systems, munitions, tanks and armored personnel carriers. They produce structural components and parts and operate maintenance, repair and upgrade facilities. In addition, there are several hundred Small and Medium Sized Enterprises (SMEs) active in the sector.
Approximately 80% of local defense production is destined for overseas customers. In 2018, Israel’s total defense exports amounted to $7.5 billion. Missile systems and defense systems against missiles exports accounted for 25% of total exports. Unmanned aerial vehicles accounted for 15%, radar and electronic warfare systems 14%, upgrade and avionics 14% and weapons stations 12%. Other exports were in optronic systems, satellite and space systems, and cyber products.
Israel has a space research program with scientific and commercial goals and has developed indigenous launch capabilities. A space cooperation agreement with NASA in 2015 expanded cooperation in civil space activities. Israel’s space program is small but significant. It’s first mission to the moon in February 2019 made Israel the 4th nation to attempt to soft land on the moon.
Israel's national carrier El Al, which flies an all-Boeing fleet, purchased and leased 15 Boeing Dreamliner wide-bodied 787-8 and 787-9 planes, with an option for an additional 13 aircraft in the future. The first Dreamliner was delivered in August 2017.
U.S. Export Control requirements are considered a serious challenge by local manufacturers procuring components that will be integrated in systems for export to third countries. The local industry also benefits from Israel’s offset program, which is administered by the Industrial Cooperation Authority at the Ministry of Economy. Israeli industry has also benefitted historically from an option to convert 25% of U.S. Government FMF from dollars to shekels, which has enabled the Israeli Ministry of Defense (MOD) to spend FMF locally. The U.S. military aid program to Israel approved for 2019-2028 gradually eliminates that provision, which means that the MOD will have to spend the entire amount in buying weapons, systems, and defense equipment solely from U.S. companies. Local industry is concerned about the negative impact the change will have on SMEs but this will not affect the four major players listed above, who already have a presence in the U.S., in one form or another.
Aircraft parts, air-control technology, electronic components for land, air and sea platforms, airborne and ground-based engines, electro-mechanical devices, microwave components, and sensors.
U.S. exporters are strongly advised to appoint a local representative to introduce their products and services to the Israeli military and aerospace & defense industries. The local representative can also provide business development services and after sales support. For additional information about FMF tenders, please contact the MOD procurement office in New York City, at: http://www.mission-ny.mod.gov.il/Pages/default.aspx
Vendor Contact Form: http://www.mission-ny.mod.gov.il/VENDORS/Pages/contactUsVedorRegistration.aspx
In addition to FMF-purchases, the MOD publishes local tenders that present limited sales opportunities for U.S. companies. The U.S. Commercial Service has access to the list of local tenders and can make information available to interested U.S. suppliers. Bidding on local tenders requires opening a local bank account and appointing a local rep. For information about local MOD tenders please contact Commercial Specialist Yael Torres at Yael.Torres@trade.gov; +972-3-519-8522.
MOD’s International Defense Cooperation Directorate, SIBAT, also publishes a directory of the Israeli defense industry that is a useful tool for U.S. exporters.
Israeli consumers are sophisticated and enjoy cosmopolitan food tastes. Currently, 16.9% of household expenditures are dedicated to food products. Producers, food processors, wholesalers, retailers, food service operators, and food importers are all part of a well-developed agribusiness sector, contributing to a domestic market that is competitive and dynamic. Israel is not self-sufficient in agriculture and is dependent on imports. In 2018, imports of agricultural products reached U.S$6.92 billion. Approximately 7% of imports were sourced from the United States.
Israel’s limited land and water resources preclude agricultural self-sufficiency; this affects local production costs and consumer prices. The country posts sizeable trade deficits in food and agricultural products, importing large volumes of feed grains and sizable volumes of consumer oriented agricultural products.
Imports from the U.S.
U.S. market share
With over 1,800 facilities, the Israeli food processing sector is an important player in the domestic economy. The Israeli food processing industry is innovative, constantly introducing new products to the market. Multi-national food manufacturers like Nestlé, Unilever, Danone, and Pepsi Co. partner with well-known Israeli food companies such as Osem and Strauss. Four groups dominate the local food processing industry: Tnuva, Osem-Nestlé, Unilever, and Strauss.
In 2017, Israeli food processors’ annual revenue stood at $16.75 billion while the beverage and tobacco industry’s annual revenue was $2.2 billion. The sector currently represents over 17% of Israel’s total manufacturing industry’s revenue. With limited land and resources, as well as a growing population, the ingredients demanded by the Israeli food processing sector represent an excellent opportunity for U.S. exporters of food ingredients. In 2017, Israel imported $2.79 billion in raw food products for the food processing industry.
Israeli Fast Moving Consumer Goods (FMCG) sales reached over $12 billion in 2018, $9 billion of which were sales of food products. The food retail market is made up of supermarket chains, as well as urban convenience stores and gas stations, neighborhood grocery stores; and markets. Sales in supermarket chains account for over 60% of total retail food market sales. Large supermarket facilities are located in the outskirts of the large cities near major roads and tend to offer parking. Smaller neighborhood supermarkets are conveniently located but tend to be more expensive.
Israeli importers face two main considerations when selecting a particular product - quality and price. In terms of price, U.S. products are not always competitive due to relatively higher production and freight costs. Products from Europe and the Mediterranean Basin and the Black Sea Basin tend to be advantaged by proximity and, in some cases, lower production costs. Transportation costs are less crucial when dealing with higher-end products that tend to have very high value-to-volume ratios, such as spices, essences, flavorings, and concentrates. Similarly, products eligible for tariff preferences under the United States-Israel Agreement on Trade in Agricultural Products (ATAP) are at a natural advantage, making transportation costs less of a factor.
Due to the EU being the biggest market for Israeli agricultural and food exports, the Israeli food and food supplement legislation and standardization system is increasingly harmonized to European standards. In many cases European standards may differ from those in the United States, resulting in non-tariff trade barriers and a challenging import licensing process.
Exporters need to consider the issue of kashrut or kosher certification. Kosher certification is not a legal requirement for importing food into Israel, except for beef, poultry, and other meat and products. However, non-kosher products have a much smaller market share, as most supermarkets and hotels refuse to carry them. In recent years there has been an increase in demand for non-kosher foods, especially from immigrants from the former Soviet Union.
Manufacturers who produce kosher products must be able to satisfy Israeli rabbinical supervisors’ demands that all ingredients and processes meet kosher standards. According to the Law for Prevention of Fraud in Kashrut, only the Chief Rabbinate of Israel can approve a product as kosher for consumption in Israel. The Chief Rabbinate may also authorize another supervisory body to act on his behalf. Here United States’ products have an advantage, as the kashrut certification issued by many U.S. rabbis is recognized by Israel’s Chief Rabbinate. It is, however, quite simple for Israeli importers to send an Israeli rabbi to any supply source to certify the products, thereby reducing the U.S. advantage.
Israel, a member of the World Trade Organization (WTO), maintains relatively few prohibitions on agricultural imports. However, Israeli authorities prohibit the import of non-kosher meat and meat products (includes beef, poultry, and mutton) under the Law for Prevention of Fraud in Kashrut. As stated above, these products must be certified as kosher by the Chief Rabbinate of Israel. The only other product prohibitions are targeted against internationally controlled substances or are designed to protect public morals, human, animal or plant health, or national security.
The U.S.-Israel FTA allows both countries the use of non-tariff restrictions or prohibitions on products from those agricultural sub-sectors that are sensitive to agricultural policy shifts. Israel has removed some administrative barriers to United States imports but retains high levies on products and commodities which compete with local industry e.g. dairy, apples, and wine.
Post Contact and Additional Information:
USDA-FAS, Office of Agricultural Affairs, U.S. Embassy, Tel Aviv Embassy Branch
The automotive industry in Israel is solely dependent on imports, given that the country has no local manufacturing base of its own. U.S. market share remains flat at 2.6%. The majority of imports are from Europe and Asia. The top four brands in Israel are: Hyundai, KIA, Toyota and Skoda. The average age of vehicles is 6.5 years and the rate of motorization is 384 vehicles per 1,000 residents.
Total new passenger vehicles / light trucks
Total medium / heavy duty
Total auto parts imports (million)
Total Number of Vehicles
New Car Sales (units)
In the past five years, the Government of Israel has implemented changes to regulation designed to increase competition in the automotive sector. In May 2013, the Government of Israel adopted what is known as the “Zelekha Committee” recommendations. The key elements of the reform were to allow “micro importers” to import up to 20 vehicles a year (including used vehicles), to allow parallel imports of commercial vehicles (in addition to already approved parallel imports of private vehicles), to minimize or eliminate unique Israeli standards, to increase acceptance of U.S. standards, and to reduce the Ministry of Transport (MOT) capital requirements for import licenses. Despite these changes, which have allowed new importers to enter the market, limited adoption of U.S. standards remains a trade barrier in the automotive sector and U.S. market share remains flat.
Additionally, the cost of car ownership in Israel is still steadily on the rise. Factors driving up the cost include high sales tax on vehicles and gasoline and the cost of replacement parts and repairs. Despite OECD recommendations, taxes on new cars in Israel are among the highest in the world: 83% sales tax and 17% VAT, which industry sources blame as the main factor preventing the car market from reaching its full potential. In 2009, the Government of Israel introduced the “Green Grade” program providing tax incentives on imports of electric vehicles and hybrids in order to help reduce carbon emission gases, but in a move to raise declining state revenues, the Ministry of Finance has "raised the bar" on discounts allowed for more fuel-efficient 'green cars', meaning cars that previously qualified will no longer qualify under the new regulations, further raising the price of cars.
The domestic aftermarket industry in Israel is characterized by the following factors:
Car security and anti-theft devices: anti-theft electronic systems, locking devices.
Car body: bumpers, radiator grills, hood and trunk lids, wings, front and rear lamps (i.e. the parts most vulnerable in car accidents). Service parts: disc brake pads, shock absorbers, front suspension parts, filters for oil and lubrication, air conditioning parts.
Replacement service parts: tires, fan belts, water hoses, water pumps, brake components, engine and transmission components, electrical components, undercarriage items that need replacing at the end of the warranty period.
Electronic accessories: TV screens for the rear seats, GPS systems, sound systems etc.
Universal lubricants: well-known brand names of high-grade oils, lubricating, glycol, wax. The market demands well-known brand names.
Israeli importers are always on the lookout for quality products at competitive prices – usually in that order. Partnering up with a reputable local representative who has excellent contacts in the industry, proven reliability, loyalty, technical suitability and after-sales service capability is a key factor to success in selling and maintaining a continued presence in the Israeli market. U.S. companies need to be aggressive in their pursuit of business opportunities and maintain an active in-country presence. The most common approach used by exporters is to obtain a local importer/distributor. Distributors will import on their own account, carry sufficient stock to satisfy ongoing demand or to use for demonstration, maintain their own sales organization, supply spare parts and maintain a service division, if applicable.
For additional information, please contact Commercial Specialist Naama Altman at: email@example.com.
Israel’s domestic energy demand will increase significantly in coming years as Israel moves to cleaner fuels for power generation and transportation. In 2040, 13 million people are expected to live in Israel (in comparison to 9 million in 2019). Additionally, by 2040, the number of vehicles is expected to increase to 6.4 million and electricity demand will double. In light of these challenges, Israel is promoting several programs to reduce pollution and increase the use of natural gas.
Israel has had the second most rapid growth of natural gas use in the world, following Peru. Coal-generated power accounted for 30 percent of Israel’s power in 2018 compared with 60 percent in 2015. The Israeli Ministry of Energy’s goal is to reach 83 percent use of gas and 17 percent renewables for electrical generation by 2030, while closing all coal plants. Transportation plans call for a gradual transfer to electric cars and natural gas trucks with a ban on imports of gasoline cars starting in 2030.
Leading sub-sectors for U.S. companies include electricity, renewable energy, and natural gas. Specifically, supply of electricity transmission and distribution equipment, IPP investments and operation of power generation sites, natural gas pipeline equipment, electric vehicles charging stations, and consulting services, are all viable opportunities for U.S. exporters.
Since the first commercial discovery of natural gas in 2000, Israel has been continuously developing its offshore gas resources. In the past 18 years, the country has been transformed from a net importer of fossil fuels to being self-sufficient and an exporter of natural gas. Domestic consumption of natural gas is steadily growing and has reached 10.4 BCM in 2017 (an 8.3% increase from 2016.) The 2017 growth in natural gas consumption was led by the electricity sector which consumed 8.5 BCM, accounting for 63% (42.8 TWh) of generation. Natural gas consumption for electricity generation is expected to reach 12.4 BCM in 2030 which will account for 70% (67 TWh) of expected generation.
U.S. company Noble Energy and its local partners discovered the Tamar field that provided more than 90% of Israel’s natural gas in 2017. After a protracted public debate and the Israeli High Court’s intervention, the Israeli Government finally agreed on a revised Gas Framework agreement in late May 2016, paving the way for Noble Energy’s development of the Leviathan gas field, expected to start production by the end of 2019. Other than Noble Energy, Greek company Energean and its partners have been awarded exploration licenses for developing the Karish and Tanin fields. In addition, the Israeli Ministry of Energy announced in November 2018 the launching of its second Offshore Bidding Round (OBR2) for natural gas and oil exploration licenses offshore Israel. The successful bidders are expected to be announced in July 2019.
Israel plans to use its abundant gas resources to leverage the development of a gas-based auxiliary industrial sector. Coupled with the recent reform in the Israeli electricity market, this presents opportunities for Independent Power Producers (IPPs) to purchase and operate gas-based electricity generation plants, as well as for manufacturers of natural gas pipeline equipment. In addition, the government’s plans to gradually transfer to electric cars and natural gas trucks with a ban on imports of gasoline cars starting in 2030 presents opportunities for the supply of equipment and services pertaining to electric vehicles charging stations.
Israel is an electricity island; its network is not connected to the systems of neighboring countries. The demand for electricity in Israel is growing at a fast and steady pace, from approximately 4,000 MW in 1990 to 12,741 MW in 2017. Demand is driven by population growth, the increase in electricity use per household, and growth of the business sector. According to the Israeli Electricity Authority, the projected peak demand in 2030 will reach 19,600 MW.
Overall installed capacity in 2017 totaled 17,837 MW, including Israel Electric Corporation Limited (“IEC”), and Independent Power Producers (“IPPs”.) According to the Electricity Authority, installed capacity in 2030 should reach 23,350 MW in order to support the electricity consumption forecasts.
IEC is Israel’s state-owned electricity utility company, and the second largest procurement organization in Israel, with $1.56 billion spend in 2017 (excluding fuels), and 5,000 active suppliers worldwide. IEC is currently the sole vertically integrated electric utility company in Israel, operating in all segments: generation, transmission, distribution, supply and system operation. The majority of the electricity generated in Israel (71%) is supplied by IEC, with installed capacity of 13.6 GW as of December 2017. The company owns, maintains and operates 17 power stations, including 5 sites for steam driven power stations, and the national transmission and distribution systems. In 2017, IEC supplied 76% of Israel’s installed generation capacity, IPP’s (gas-fired) accounted for 18%, and 6% of generation originated from renewables.
In June 2018, the Government of Israel approved a comprehensive structural reform in the Israeli electricity sector, planned to be implemented over the course of 8 years (2018-2026). The reform’s main objectives are to decentralize IEC, enhance efficiency and environmental sustainability in the electricity market, and reduce electricity rates through increased competition. As part of the reform, IEC’s share in electricity generation will be reduced from 60% to 40%. IEC will retain a monopoly in the transmission and distribution segments, which require significant upgrading. It will work to develop a smart and modern grid that will improve the quality of electricity supply. Significant opportunities exist for manufacturers of relevant equipment for substations, switching stations, power lines and more (such as power cables, transformers, electronic meters, etc.)
As a state-owned company, IEC is committed to Israel's WTO/GPA agreement concerning public tender procedures. While some projects are tendered out in open tender procedures, in most cases, a selective tendering process requires potential suppliers to pre-qualify to be included in IEC's approved suppliers' list.
In 2009, the Israeli government established a target for renewables to reach 5% electricity generation from renewable sources by 2016, and 10% by 2020. Despite ample solar power potential, Israel fell well short of meeting the initial 5% target, producing only 2.6% of its electricity from renewables in 2016. Bureaucratic bottlenecks, cumbersome regulations, a lack of land, and anticipation of newly discovered offshore gas coming online that can produce electricity at a lower cost than solar are often cited as factors explaining the lower than expected use of solar energy. In September 2015, the Israeli Cabinet adopted a greenhouse gas (GHG) emission reduction goal of 26% reduction in GHG emission levels by 2030, using 2005 as the base year. Sector specific targets include a 17% reduction in electricity consumption by 2030 and 17% of electricity generated in 2030 from renewable sources. Thus, Israel’s current targets for producing electricity from renewable sources are: 10% by 2020; 13% by 2025, and 17% by 2030.
Israel has numerous technology firms developing renewable energy technologies, many of which operating outside of Israel. Some renewable energy infrastructure projects (primarily PV and Wind) are planned in the coming years, and will be implemented by private electricity producers. U.S.-Israeli cooperation and joint R&D in the renewable sector is growing. The BIRD Foundation provides a good platform for joint U.S.-Israel commercial R&D in renewable energy and energy efficiency and has announced a new call for proposals in May 2019.
Natural Gas Pipelines
The state-owned Israel Natural Gas Lines company (INGL) is the owner and operator of the national pipeline transmission infrastructure, the trunk line. Six private and public companies are holding regional franchises to build and operate distribution networks to connect industries to natural gas pipeline networks. With extensive investment in pipeline construction, there are ongoing opportunities for U.S. equipment suppliers and engineering consultants.
Israel’s public healthcare system is well-advanced by international standards but falls behind other Western countries in the number of hospital beds, doctors and nurses and public spending ratio. Israel spends only 7.5% of its GDP on healthcare, providing universal coverage to the entire population via four independent health management organizations and a network of hospitals, community clinics and specialized doctors. Israeli healthcare facilities are modern and are open to adopt new, cost effective technologies and procedures. Many Israeli doctors receive training in the United States and maintain personal and professional relationships with U.S. colleagues at major medical centers. Israel’s healthcare policy makers have been focusing on promoting healthy nutrition and lifestyle, preventive medicine and screening. In 2018, the Ministry of Health (MoH) announced it will establish new procedures to shift from hospital care to homecare. The MoH also continues to improve the national patient medical record system, both for the benefit of the patient and for clinical research purposes.
Israel is a global technology research and development center. Its strength in this sector stems from inter-disciplinary capabilities, which bring together medicine, clinical expertise, materials science, electronics, software expertise and engineering know-how. Israeli development centers of multinational companies have an annual turnover of billions of dollars.
The primary healthcare industry opportunity for U.S. companies is within the area of healthcare technology, including medical devices and pharmaceuticals. Israel’s healthcare technology market is estimated at $6.2 billion, of which devices account for $2.4 billion and pharma $3.8 billion. Imports make up over 65% of the device market and about 60% of the pharma market. Top medical device imports are surgical instruments and other medical electronics, lab reagents, diagnostic equipment and catheters. Top pharma imports include medicaments in measured doses for retail sale, antisera and blood fractions and immunology products. The United States is Israel’s largest single-country source of medical devices and pharmaceuticals, followed by China and Germany. Total imports of medical devices from the United States to Israel in 2018 accounted for $458 million. Total imports of pharmaceutical products from the United States to Israel in 2018 accounted for $373 million. U.S. multinationals have production lines in Europe; therefore, the U.S. market share is larger when considering imports of U.S. brands that are being produced in Europe or shipped to Israel via a European country.
Local and International Competition
Israel is a sophisticated and mature market. U.S. suppliers face intense competition and should therefore be ready to compete and support their local distributors through educational presentations, material and lobbying/advocacy. Major multinationals and large companies have established direct sales and marketing offices in Israel. Other exporters operate through local distributors. There are hundreds of medical distributors that are well-established throughout the country.
Israel’s starting point in the digital world is especially good. There is a well-developed infrastructure and high-tech industry that offers innovative tools and applications. The Ministry of Health and Digital Israel are leading a national program that aims to harness and leverage the opportunity inherent in the digital revolution and progress of information and communication technologies. The system connects caregivers and allows them to watch the diagnoses and treatments performed by other practitioners in different organizations. The program also includes the deployment of an ER queues management application that notifies the progress of a patient’s treatment in the ER and increases the control on ER loads.
The aging population creates multiple challenges for Israeli society. The need to cope with the steadily increasing number of elderly people with dementia is one of Israel’s healthcare system major challenges. The Ministry of Health developed a national strategic plan to address Alzheimer’s and other types of dementia and age-related chronic diseases. The plan offers a holistic perspective and emphasizes collaboration among all relevant agencies: government ministries, the health plans and other organizations. The Strategic Plan aspires to cope with key issues that make it difficult for the current service system to provide an appropriate response to the unique needs of elderly patients.
Increasing Private Health Spending
The proportion of private financing in national health spending in Israel, on top of the health tax, continues to rise. According to the Israel Central Bureau of Statistics, the proportion of private spending is 40%, making it one of the highest rates in the Organization for Economic Cooperation and Development (OECD), in which the aggregate rate of private health spending is only 28%. The trend is clear and consistent, resulting from an erosion of the public healthcare system's resources. Private spending is composed of payments for dentistry (most dentistry in Israel is not included in the state health basket), supplementary and commercial health insurance, private care, purchases of medications, deductible payments and purchases of medical equipment.
The rate of public spending has not changed since 1995. The government refrains from increasing the health system's financial resources, despite population growth and technological requirements. Among other things, every purchase of an MRI machine, or a machine used in cancer radiology treatments, requires a special license. The rationale for this policy on diagnostic imaging devices like an MRI may very well be understandable, since increasing the supply can increase the demand, including unnecessary diagnoses.
Number of hospitals:
Number of hospital beds
Life expectancy men/women
Infant mortality rate
3.1 per 1,000 live births
Percent of population older than 65
The MoH has an overarching regulatory and policy making role. U.S. companies interested in exporting medical devices or pharmaceuticals to Israel need to appoint a local distributor, agent or other legal representative to register their products. The device registration application should be accompanied by a 510(k), Pre-Market Approval (PMA) or an Investigational Device Exemption (IDE). Pharma registration is more complex and requires additional testing and clinical investigation on top of the product file and FDA certification. The average time it takes to obtain a market approval from the Ministry of Health is 150 days for medical devices and about 360 days for pharmaceuticals.
The Standard Institute of Israel (SII) is the agency responsible for the development of most product standards, compliance testing, and certification of products and industry quality assurance system. Israel has stated its intention to follow international standards whenever possible. However, it has been reported that some standards still exist that tend to favor domestic producers over foreign manufacturers. Electronic medical devices must comply with Israel's electric standard of 220 V, 50 Hz and are subject to an electric safety test in Israel.
Israel’s Reimbursement System is called “The Healthcare Basket.” It includes all the services, medications, supplies and medical equipment that the insured is entitled to receive according to the National Health Insurance Law. It was originally determined based on the health services that were provided by the Ministry of Health and the Clalit Health Fund as of January 1, 1994 and has been regularly updated by the Ministry of Health, based on recommendations by a public committee.
The following fields of service are included in the healthcare basket:
There are several health services that, as of now, have not been transferred to the health funds and remain the responsibility of the state:
Israel has a growing elderly population and limited resources. As a result, the MoH announced shifting hospital care to homecare when possible. This shift will continue increasing the demand for cost-saving products and for products that help patients monitor their health at home. Wound care, advanced diagnostics and minimal invasive procedures continue to be a high priority in the public healthcare market. In addition, a well-developed private sector health care in the areas of dental, eye laser surgery and plastic/aesthetic surgery keep up the demand for advanced medical instruments and appliances. Israel has an excellent digital health tech base and is a world leader in mobile and E health implementations. Opportunities exist however, in further advancing drug monitoring and disease surveillance. Other best sales prospects include minimally invasive surgical instruments and technologies that are integrated with imaging capabilities, cardiology equipment, equipment and supplies for plastic surgery, smart implants, dental instruments, equipment and technologies for pain management, physiotherapy, ozone & oxygen therapy, OR equipment & cost-saving, single-use products, point of care diagnostic kits and wound management technologies.
The U.S. Commercial Service at the U.S. Embassy, Tel Aviv Branch Office, in Israel helps American exporters enter the Israeli market through partner search and trade promotion programs. For additional information, please contact Commercial Specialist Yael Torres at: Yael.Torres@trade.gov.
Information and Communication Technology (ICT)
Israel’s information and communication technology (ICT) developments were initially fueled by geo-political needs. Defense-related research and development (R&D) had a significant impact on the start of Israel’s industrial sector, the higher educational system in science and engineering, the research community, and the structure of the ICT industry work force.
The government invested a lot of funding to develop solutions for defense-oriented equipment and capabilities. Demand for highly skilled workers, scientists, and engineers affected public resources allocated to universities and research institutions. However, not all investment in this area stem from the defense sector. Today, multinational companies account for a significant portion of the research spending in the Israeli industry. With more than 300 R&D centers in Israel, American companies constitute about 55% of all R&D centers in the country. Corporations such as Intel, IBM, Google, Cisco, Motorola, Philips, Apple, and many others have invested and set up research centers in Israel to take advantage of the local talent.
Throughout the years, Israel has become an ICT hub for developers in software, data communications, electro-optics, hardware design, and internet technologies, including cybersecurity software. High-technology industries include medical technology, biotechnology, agricultural technology, materials technology, and military technology, all of which use ICT in their final products. There are more than 6,600 startups in Israel's small and connected economy, 14 times the concentration of startups per capita in Europe. And while Israel has just 0.1% of the world's population, the nation attracts 19% of global investment in cybersecurity, ranks number one globally in R&D expenditures per GDP, and attracts the highest rate of venture capital funding per capita in the world — some $674 per capita in 2018, according to a report by Start-Up Nation Central (SNC) and PwC Israel.
Total Israeli Exports
Total Israeli Imports
U.S. Market Share of Imports
Israel is considered a vital player in the digital world, especially in IT, software and internet areas, with a market that has increased by almost 400% in the last decade. Israeli software helps power everything from PC motherboard chips to cell phones and is deployed in business, consumer, and technical applications around the world. More than 100 Israeli software companies are active in cloud computing and the delivery of business and consumer services over the internet, which is considered the next revolution in the IT market.
Israel’s software industry has attracted a great deal of attention from global technology leaders. Many companies, including HP, IBM, Microsoft, and Oracle, have established operations and manufacturing centers in the country. Additionally, American companies have identified Israel as a prime destination for the establishment of R&D centers. Having an R&D presence in Israel offers an opportunity for the American company to leverage local talent and enhance their exsiting technologies by collaborating with Israeli companies in various software fields.
Israel has been recognized as a leading player in the semiconductor industry for many years. Currently there are five active semiconductor manufacturing plants (fabs) in Israel, three of which belong to Intel and the other two fabs belonging to Tower/Jazz. The Israeli semiconductor industry has grown to employ over 20,000 people in dozens of companies. Almost all of the world’s leading semiconductor firms have significant R&D centers in Israel, alongside of which a large number of local semiconductor companies have grown. The Israeli semiconductor industry is now one of the most advanced internationally, with the second or third highest concentration of design houses in the world.
There any many multinational semiconductor companies present in Israel, including Freescale Semiconductor, Infineon, Vishay, Zoran, Texas Instruments, IBM, Marvel, SanDisk, Applied Materials, and KLA-Tencor. The U.S. is the top exporter of semiconductor manufacturing equipment to Israel, and this sub-sector remains a key opportunity for U.S. manufacturers of semiconductor equipment.
The Ministry of Communication announced that a tender for the fifth generation (5G) celluar will be annouced during 2019, with the intention of launching the adavanced network in 2020. This tender will offer an opportunity for U.S. companies to supply the 5G ecosystem, including mobile chipsets, modems, data center equipment, routers, fiber connectivity, IoT devices and more.
Israeli companies are taking a leading role in developing IT security, cybersecurity solutions, cloud computing, business intelligence, blockchain, virtualization, e-government, and internet applications.
Growth in the ICT market will rely on a combination of new services and networks. Over the next years, most of the growth in the Israeli telecom market will arise from mobile broadband, VoIP, and pay-tv. As the ability to offer multiplayer services becomes more important in the Israeli market, operators look for mergers or partnerships that will allow them to expand their product range.
Ongoing investments in higher-speed High Speed Packet Access (HSPA) technology are enabling the deployment of a wider range of services. Operators have rolled out 4G services based on Long-term Evolutions (LTE), and Israel is ranked number 50 out of 77 countries who accommodate 4G services, and currently planning on launching 5G in 2020. The entry of mobile virtual network operators (MVNO) to the mobile sector has created competition and has driven down retail prices for consumers.
The demand for high-bandwidth applications, such as HDVT and growing rates of internet data traffic have contributed to the telecom industry’s most pressing need: bigger pipes. Issues such as network management, providing support for new applications and creating innovative ways to better monetize subscribers and decrease operating expenses are becoming critically important. These challenges provide substantial opportunities for U.S. Companies interested in expanding in Israel’s telecom sector. thriving telecom sector.
For more information please contact Commercial Specialist Christina Azar at Christina.Azar@trade.gov; +972-3-519-8524
Safety and Security (excluding cyber security)
Israel’s market for safety and security equipment and services is sophisticated and highly competitive. The market is price sensitive but demands high quality equipment with low failure rates. The market is highly receptive to U.S. products and technologies. Current imports of safety and security products to Israel are an estimated $1.2 billion, with almost 50% U.S. market share. Hundreds of U.S. security companies are active in the Israeli market, including L3, Morpho Trust, Raytheon, FLIR, Smiths Detection, SAIC and many others. In the low-end equipment market, however, most U.S. technologies are not price competitive with Asian products.
Israel has some 600 exporters of security technologies and services, including integrators and service companies. The country’s security-awareness and high-level of preparedness are the driving forces for the development of a cutting-edge security industry. The annual sales of domestic equipment and services are estimated at $1.5 billion, with exports exceeding 70%. There are overlaps between this sector and the defense sector. According to Israel’s MOD, 8% of total defense exports consisted of cyber systems and intelligence and information systems in 2018. Good opportunities also exist in sales of security items financed with U.S. funds (FMS/FMF) to the local defense establishment.
Israeli manufacturers are important end-users of imported security equipment and components that are integrated into locally produced security systems for export. This makes Israel an attractive market for U.S. manufacturers of high-end equipment and components that can be integrated into Israeli systems. There is a trend though, to avoid the purchase of U.S. export-controlled items for integration in systems due to the restrictions on re-export.
Some homeland security systems are sold to the Israeli MOD with Foreign Military Funding (FMF) or Foreign Military Sales (FMS), giving an advantage to U.S. manufacturers.
In the demanding HLS sector, there is ongoing need for high quality, efficient systems with low failure rates. One of the country’s security concerns is safeguarding the offshore natural gas facilities and the maritime transport system supporting the rigs. Another concern is safeguarding the border with the Gaza Strip from fire balloons and violent demonstrations that require non-lethal response. Subsectors with most potential for the U.S. industry include screening technologies, sensors, non-lethal weapons, advanced first-responder systems and technologies including situational awareness, sensors and wearables. Other leading sub sectors include law enforcement supporting technologies to combat cybercrime, technologies and methods to secure critical infrastructure and public facilities, safe and secure cities technologies, border protection including maritime security (such as biometrics, screening systems and robotics), unmanned aerial systems, advanced first responder technologies such as video analytics, first responders protective clothing, wearable and situational awareness technologies; environmentally safe fire retardants.
Good opportunities exist for sophisticated equipment used in homeland security applications. U.S. security equipment, which enjoys an excellent reputation in Israel due to its high reliability, is often used for sensitive applications by high-security industries and for key infrastructures and installations. The market offers good opportunities for U.S. exporters of non-lethal dispersion of masses means, vehicle wheel locking devices detection and screening systems, sensors, biometric solutions, x-ray systems, anti-drone technologies and solutions, that can detect, classify and hinder potential threats, first responder solutions, technologies for the prevention of agricultural crime, including hyperspectral scanners. Technologies for detection of hidden weapons and arms. U.S. exporters should take into account that their products may be re-exported. U.S. companies that want to participate in this sector should be knowledgeable of U.S. export control regulations.
The main single buyer of safety and security equipment and services in Israel is the Ministry of Public Security (MoPS). Its annual procurement budget is estimated around $1.1 billion, an amount that is spent on equipment and services for the Israel Police, Prison Service, Fire & Rescue Authority, Anti-Drug and Alcohol Authority and the Witness Protection Authority. Public tenders are not always visible to the general public, so U.S. companies will not always be aware of major tenders. For this reason and because there is no single centralized Israeli government website where public procurements are advertised, we encourage U.S. suppliers to appoint a local agent who would keep a close eye on immediate and long-term opportunities. For additional information, please contact Commercial Specialist Yael Torres at Yael.Torres@trade.gov; Phone: +972-3-519-8522
Travel and Tourism
The Israeli outbound travel market has reached a record number in 2018 with 8.5 million departures by Israelis abroad. Departures by air accounted for 7.8 million, a 10% increase compared to 2017 and 23% increase compared to 2016. The increase in departures has been consistent in the past 6 years, mostly attributed to a favorable exchange rate, an expansion of the “Open Skies” policy and the growing market presence of low-cost airlines. The larger share of air departures is short hauls (3-7 days). About 40% of departures are in the range of 5-9 days. Only 7% of total departures are for 10 days or longer. The U.S. market share was 5.7% with 439,153 entries by Israelis in 2018.
Table A: Air Departures by Israelis
Israel has been a growth market for the U.S. travel industry in terms of arrivals to the United States and spending due to the strong trade, business, security and R&D activities between the two countries. Israel’s outbound travel market to the United States in 2018 is estimated to have grown 4.3% compared to 2017. Increasing competition with Asian destinations such as China, India, Thailand, Vietnam, and Japan, is evident. To regain market share and attract Israeli travelers, U.S. destinations and travel service providers would need to focus on direct marketing and promotion to Israeli consumers through social media and other digital means.
United Airlines, American Airlines, Delta and Israeli EL-AL airlines operate multiple daily direct flights from Tel Aviv to New York, Philadelphia, San Francisco, Boston, Miami, Los Angeles and Washington D.C. European airlines offer competitive prices and routes to the U.S. via Europe. Over 500 travel agents and about 12 wholesale operators are active in the Israeli outbound travel market. Most operators are conservative in selecting new travel products or expanding beyond popular destinations.
The most popular activities while in the United States are shopping, dining, attending sports events, music festivals, museums, concerts, and performing arts. Israelis are also attracted to trendy accommodations such as boutique hotels and bed & breakfasts in exotic sceneries. Wine tours that include specialized culinary experiences, topped by outlet shopping and sports/arts performance would make the highlight of any trip.
Israeli tour operators and media representatives attend the U.S. Travel Associations’ International Pow Wow (IPW) yearly to meet suppliers and to expand their offerings. Boutique hotels, ground transportation, culinary tours, outlet shopping, music festivals, family travel destinations and cultural events may find opportunities in Israel, especially by offering quality products and flexibility. For more information, please contact U.S. Commercial Specialist Yael Torres at: Yael.Torres@trade.gov
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