Israeli tech sector remains resilient but warns of longer-term impact

Israel’s high-tech sector is continuing to operate during the ongoing conflict with Iran, but faces growing concern over longer-term impacts, including the possibility of companies relocating activity abroad, according to a new survey.

The findings, published this week by the Israel Innovation Authority, highlight widespread disruption across the industry, even as most firms maintain business and development activity.

The most immediate challenge identified in the survey is the significant shortage of available staff.

Nearly half of companies (48 percent) reported that more than a quarter of their workforce is absent, due to a combination of military reserve duty, lack of educational frameworks and security restrictions. Only around 11 percent said they were unaffected.

These disruptions are already affecting output, with 87 percent of companies reporting delays in development timelines or product launches, including 42 percent describing the delays as substantial. Smaller companies reported higher rates of disruption.

Dror Bin, chief executive of the Israel Innovation Authority, said the findings reflected both resilience and growing pressure on the sector.

“The Israeli high-tech sector continues to demonstrate its resilience and its ability to operate even under challenging conditions,” he said.

“At present, the sector is facing a range of challenges related to human capital, supply chains, product development and access to capital.”

He added that the priority is to help companies navigate the current disruption and return to growth once conditions stabilise.

The survey also points to challenges in raising capital – a key driver of growth in Israel’s high-tech sector.

Around 71 percent of companies said the security situation has affected fundraising, with respondents reporting delays, postponed investment decisions and, in some cases, cancellations.

International activity has also been disrupted, with approximately 75 percent of companies affected by restrictions on global travel. Around 35 percent described the impact as significant, citing difficulties in holding meetings, attending conferences, conducting sales and forming partnerships.

Among manufacturing companies, which made up around 41 percent of respondents, 76 percent reported some level of disruption to production, including 24 percent reporting a significant impact and a small number indicating a complete halt.

Companies also reported delays in importing raw materials and partial supply stoppages, reflecting disruption across both global and local supply chains.

The survey also highlights growing concern about the sector’s future trajectory if the conflict continues.

Around 31 percent of companies said they are considering relocating activity abroad, while a further 9 percent said they had explored the option but decided against it. The likelihood of relocation was higher among companies more heavily affected by the current situation.

Only around 13 percent of respondents said they expect no change in activity if conditions persist, while others anticipate slower growth, project delays or reductions in activity and workforce.

Around 12 percent said prolonged disruption could lead to company closures, particularly among early-stage firms.

Despite the challenges, most companies have continued operating, with only around 10 percent placing employees on unpaid leave, pointing to a degree of resilience in the short term even as uncertainty remains.