Israel's Silicon Valley on the brink of collapse

According to Mumbai's The Economic Times, hundreds of Israel-based multinational technology companies are considering contingency plans to ensure ongoing operations and protection for their strategic interests and investments in manufacturing and development.

Planning for the development of technological products is carried out according to a specific timetable detailed years before – any delay, even a small delay, in development may mean large losses that giant companies can't afford in light of fierce competition.

The plan takes into account the possibility of these companies "emigrating" by shifting their activities to India, other destinations in the Middle East, or Eastern European countries.

Peter Bendor-Samuel, CEO of Everest Group, says that technology services in Israel will be affected in the short and medium terms.

In an interview with the newspaper, he explains the reasons as "concerns raised by the conflict in the region for the safety of the companies' headquarters and devices, and also because many of their local employees have been called up to join the reserve army."

CEOs bid their companies farewell

Operation Al-Aqsa Flood has added to the troubles of Israel's tech sector, which already suffers from "uncertainty" among investors and entrepreneurs, who have recently been heavily involved in protests in Tel Aviv over judicial amendments.

Several companies financed expenses to transport their employees to participate in the demonstrations last month. Now, all workers without exception in this sector may be invited to join the reserve army. 

In an article published on 17 October, entitled "CEOs went to the reserve army knowing that this is the end of their companies," the Israeli newspaper The Marker, which specialises in financial markets, quoted testimonies about the start of recruitment.

It pointed out that recruitment operations, which included workers in startups, would result in the collapse of these companies and consequent heavy losses on the Israeli economy.

The war has damaged the high-tech industry since its early days; the dangers mainly beset small startups that have previously struggled to obtain funding. The complete disruption of their activities after the call-up of their employees and managers will likely lead to their closure.

It gave some examples of recruitment, such as recruiting two founders of the agricultural startup Mata and directing 100% of its employees to the reserve army. Speaking to the newspaper, the company's CEO expects to return to office two months after joining the reserve army without finding a company to work for.

Thousands of recruits from the tech sector

The number of recruits from tech companies is in the thousands, according to Y-net, which published an article titled "Thousands recruited: War shakes tech companies;" it said that between 10 and 15% of the workers (about 400,000) in these companies, most of whom are young people, have been called up into the reserve army and others have been forced to stay at home.

NVIDIA, the giant manufacturer of chips used in AI and graphics technologies and systems, announced the call-up of 400 of its 3,300 employees in Israel.

CEO Jensen Huang confirmed that an employee of the company was among the captives taken by Hamas and that a former employee was among those killed in the fighting; also killed is the daughter of Mellanox founder, a former NVIDIA employee, he averred.

The company also announced the postponement of the AI Summit planned for the middle of this month in Tel Aviv – the startup city as it is called – and was to be attended by more than 2,500 participants.

Technology companies and development centres are facing a real challenge of emergency management to cope with shortages caused by call-ups, which have taken away software developers, engineers, programmers, and highly qualified people in software science and development, AI technologies, data, robotics, and cybersecurity systems. That means that compensation won't be easy.

Revenge on Hamas' crypto

This will, of course, translate into losses for shares of companies, which Israeli reports say are trying to keep pace with rapid developments and that, despite the severity of the crisis, have harnessed their techniques to support the Israeli army in Operation Iron Swords.

According to a report by the Israeli economic newspaper Globes, titled "Retaliation of high-tech entrepreneurs," the closure of Hamas' crypto money supply line is an integrated work carried out by Israeli "recruits" and technology companies to dry up the movement's funding sources.

The report pointed out that the funding operations were carried out through electronic financial transaction platforms and cryptocurrencies. It showed that the platforms Rapid and PayPal established a special HML active in Israel, the United States, and other countries, to monitor and ban Hamas funding more quickly.

The funding is done through fundraising campaigns on Telegram, X (formerly Twitter), Facebook, and TikTok and channelled through PayPal and Wise in various currency and cryptocurrency transfer networks.

AI in battle

In practice, several recruited entrepreneurs have adopted active social media surveys through extensive use of AI and the use of each country's domestic legislation to restrict Hamas' financial supplies.

The report reveals that PayPal, which has about 300 employees in Israel, focuses its scrutiny specifically on the transferal of funds to Hamas and on obtaining faster approvals to close accounts via a special CML. The company also shuts down any user account or page that has participated in a video expressing support for Hamas.

Globes quoted a PayPal employee as stressing that "many of the employees who were called up to the reserve army were looking for an immediate way to assist in the war effort. This was one of the methods developed within a few hours. In the end, it was these employees (recruits) who identified the accounts themselves or received inquiries from citizens."

The report also highlighted the role of Omer Perchik, a high-tech entrepreneur and CEO of Any.do, who is among the Israeli technology pioneers enlisted in the reserve army; his mission is to open direct communication channels with major social media organizations in the United States. Perchik sends them requests to block pages which provide links calling for raising funds for Hamas.

According to the report, recruits (entrepreneurs, innovators, and startup executives) participated in the scanning and monitoring of cryptocurrency exchange platforms, especially Binance and Paybit. They were able to identify and block Hamas transactions by sending requests to contacts on the exchanges.

Psychiatrists for Israeli companies

It also quoted Ben Samocha, founder of CryptoJungle, as saying that he and a team of recruits participated in monitoring cryptocurrencies and that they monitored 600 transactions tagged as fundraising initiatives for Gaza. He said it turned out to be a crypto wallet used by Hamas to collect donations.

According to Globes' report, the evidence was sent to Lahav 433's monitoring unit with a request to Binance to transfer the funds to the Israeli treasury.

This atmosphere caused tension in the business climate, and psychiatrists were hired to "follow up with the technology companies" whose employees were called up to join the reserve army to help these employees better understand the transformations that their companies will experience as a result of the war.

According to him, one of these doctors, Eldad Rom, has a role to monitor crisis management and rehabilitation for coexistence in a climate of "national psychological disorder," according to an article published by an Israeli daily newspaper specializing in finance and business.

The technology sector is one of the oldest and most important sectors in Israel; it was launched in 1974, the date Intel established itself in the country, while the history of the establishment of startups dates back to the 1990s.

Since then, Israel has gained a wide reputation in this field, and after half a century of investments, it has become the second global technological centre after the US Silicon Valley, as thousands of companies are stationed in it.

Tech companies such as Apple, Google, and Intel, run development centres in Israel with tens of thousands of employees and act as the backbone of the high-tech sector, which was in crisis before the Gaza war.

400 companies, including world giants

According to official reports, about 400 development centres and about 70,000 workers of various nationalities work for multinational technology companies in Israel, out of about 400,000 employees and workers in the high-tech industry.

The companies include Intel, Apple, Google, IBM, Facebook, Microsoft, Nvidia, Oracle, and Cisco. This is in addition to Israeli companies that have become giants, such as Check Point and Amdocs.

Studies on investing in technology companies in Israel describe the risk of uncalculated consequences, in a country that has been living for decades in the wake of warfare and political instability, in addition to bureaucracy, economic crises, and, finally, judicial amendments that have sparked widespread controversy.

Israel has nevertheless managed to be the origin of many applications used today by billions of people on a daily basis, such as Intel and Apple computer processors, iPhone facial recognition technologies, and Samsung mobile phone cameras.

But the crisis of global giants and question marks about the situation in Israel and the possibilities of expanding their investments have already been raised for months, and have increased on the backdrop of the Gaza war. 

A report by Globes revealed that the head of the global electronics giant Samsung, Lee Jae-Yong – an international economic figure comparable to Apple's CEO – secretly visited Israel a week before the start of Operation Al-Aqsa Flood.

This visit, one of many public and private visits by CEOs of large international companies of this size over the past decade, reflects, according to the Israeli narrative, the central position enjoyed by their Israeli subsidiaries. However, they were visits to take stock of the reality of the business climate, which has deteriorated significantly since the beginning of the year.

Israel's Ministry of Innovation, Science and Technology has warned of declining investments in Israel's high-tech industry. That was due to uncertainty, it said.

Investments in high-tech technology in Israel have reached about $5bn so far this year, the lowest figure since 2019; it peaked in 2021 after exceeding $25bn.

Today, fears are no longer related to the state of "uncertainty" as the current war turns into a long-term one, with serious damage to the Israeli home front, which until recently had been fortified by an invincible army, cybersecurity that dazzled the world, and espionage technologies and military systems that are among the most advanced in the world.