Israel's tech industry is facing a critical juncture as the strong shekel poses an existential threat to its very survival. The math is stark: with an average monthly salary of 30,000 shekels, each high-tech worker costs an exporting employer approximately 8,500 dollars a month at the current exchange rate. This figure is set to rise to 10,000 dollars a month if the shekel strengthens further, an increase of 1,500 dollars. For the 400,000 employees in the high-tech sector, this translates to a staggering 21 billion shekels in added labor costs, equivalent to the cost of employing 40,000 additional workers or the number of jobs already at risk of being relocated abroad. This is not a mere theoretical concern; it's a tangible, immediate threat. The situation is so dire that even the Bank of Israel acknowledges that it's beyond their control this time around. The exchange rate is being driven by external factors, including the Trump administration's push to weaken the U.S. dollar and a decline in Israel's risk premium. The dollar has weakened significantly against the shekel and other major currencies since January 2025, the start of Trump's second term in the White House. This is a critical moment for Israel's tech industry, and the implications are far-reaching. The industry is already beginning to relocate development jobs abroad, a trend that could deepen the damage to Israel's high-tech sector. This is the first time in its history that the industry has had to face such a challenge. The situation is so urgent that the Finance Ministry has convened an emergency meeting with senior figures from the local tech industry. The meeting was attended by high-profile participants, including Michal Braverman-Blumenstyk, Microsoft Israel R&D Center Managing Director; Arik Kleinstein, co-founder of Glilot Capital; Adi Soffer Teeni, General Manager of Meta Israel; Dror Bin, CEO of the Israel Innovation Authority; and representatives of the Growth Companies Forum and the high-tech association within the Manufacturers Association. The survey presented at the meeting revealed alarming figures: most firms are preparing for a margin erosion of 15% or more, leading to layoffs and relocation of operations abroad. This trend is not limited to large multinational firms but also affects early-stage startups. The proposed solutions must be varied and implemented quickly, as any delay could lead to a tsunami of job losses and relocations. One solution being considered is paying corporate tax in dollars, but this is not relevant for startups that are still unprofitable and pay little direct tax. Another proposal is to reactivate the mechanism developed during the COVID-19 period, in which grants are later converted into loans repaid as a percentage of revenue. This time, a 1 billion shekel emergency fund is being proposed, rather than the 400 million shekel fund used previously. The High-Tech Association has prepared a position paper with a range of creative proposals, including municipal tax discounts for major exporters and easing the cost of tax credit points paid by employers. These measures would allow employees to keep the same net salary while reducing employer costs. The situation is so critical that it's not just about the tech sector; it's about the broader economy. The strong shekel is seen as the final trigger that could deepen the damage to Israel's high-tech sector, which has already begun to relocate development jobs abroad. This trend is a cause for concern, as it could lead to a loss of knowledge and expertise in Israel, harming not only the tech sector but also broader industries across the economy. The Finance Ministry is now under pressure to act quickly and decisively to mitigate the impact of the strong shekel on the tech industry. The urgency is palpable, and the implications are far-reaching. The tech industry is a vital part of Israel's economy, and its survival is crucial for the country's future. The challenge is immense, but with swift and effective action, Israel can navigate this crisis and emerge stronger than ever.
