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Will the strong shekel hurt the high-tech industry?

The high-tech industry pulled the Israeli economy upwards and allowed it to recover relatively quickly from the corona damage.

Is the strengthening of the shekel against the dollar endangering the industry whose most profits (and investments in it) are in dollars, but whose expenses are in shekels?

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• Hi-Tech

• NIS

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Monday, 01 November 2021, 09:06 Updated: 09:43

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One of the side effects of the weakening of the dollar against the shekel is the damage to anyone whose shekel expenses and profits are in dollars (or other foreign currency that also weakened against the shekel). High-tech is the leading export industry in the Israeli economy,

so will the weakening of the dollar lead to severe damage to the industry that has so far survived the Corona epidemic optimally? Senior Israeli high-tech industry asked.

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Rami Tamir, CEO and co-founder, Salto (Photo: Doron Letzer)

The existential deliberation of the startup

Rami Tamir, CEO and co-founder, Salto:

"The dollar, which has weakened against the shekel, is a significant part of the financing for Israeli startups. The investment from the funds is received in dollars. The discussion that always takes place regarding this decision is how much of the investment to convert to shekels and how much to leave in dollars, since the conversion rate is volatile.

Extreme fluctuations in the conversion rate can shorten the company's run rate by several months. Since we are talking about startups, this is practically a significant impact on the startup strategy, especially one that is in the very early stages.

There are two approaches to the question of when and how much to convert. According to the first approach, the expected amount of expenditure is converted into shekels in the next year or two. Another approach is to try to profit from volatility, and in fact take a position on the dollar. "

"I am a follower of the first approach. My job is to make sure that the company implements its strategy, and that it has enough resources to do so. That is my focus. I do not pretend to specialize in forex and therefore I will not take that risk."

Shahaf Shakof, Director of the HIPO Innovation Center in Israel (Photo: PR)

The unification of activity patterns in Israel and abroad

Seagull transparent, director of the innovation center of HIPO Israel

: "The weakening dollar against the shekel poses many challenges for the opening of the high-tech industry in Israel.

In the era of post-impact beams, companies tech confirmatory mostly remote work, enabling recruitment from different countries. United States, for example, Technology companies are hiring workers away from development centers like Palo Alto, or like in Austin, for example, at much lower wages.

This means that if until today, when an Israeli developer was compared to its American counterpart, the wage differences were noticeable, then now, with the weakening of the dollar, the situation is reversed and it becomes clear to all of us that technology companies have an alternative in the form of workers from other countries.

All this without at all talking about the salary increases of developers in the country and the difficulty it adds. Even so, the 'temptations' given to employees, such as a basket of stocks, are beginning to be equivalent to the stocks they receive in the United States.

If the situation does not change, I expect that we will see a trend of stopping recruitment in American companies in the Israeli high-tech industry, due to the economic inefficiency involved.

"In my opinion, the world is going to a place where artificial attempts to find arbitrage are disappearing. Firstly the gaps between currencies, secondly - the global transition to a uniform taxation system that eliminates the artificial advantages of places like Ireland, finally - remote work and the abolition of the real estate footprint.

Therefore, I believe that the advantage of the State of Israel will remain in the essential place - better talents, work ethic and willingness to invest, creativity in solutions, high technical capabilities following military training, all of which will make Israel an attraction for companies worldwide to build the next generation of global technological entrepreneurship. .

Tut Shani, CEO and Founder of Sharona Partners (Photo: PR)

Minimal damage, if any

Strawberry Monday, CEO and founder of Partners Sharona:

I think the Israeli high-tech injury to be minimal, if at all.

The decline of the dollar against the strengthening of the shekel, mainly concerns the tax payment points and salaries. It varies among companies with corporate leaders abroad, holding only the Ministry of Research And development in Israel, as opposed to companies in which the main company is an Israeli company.

In both cases, most of the manpower of the high-tech companies is not in the country.

For the first group, it is likely that the fall in the dollar exchange rate will not have a significant effect. The relative share from which these companies pay tax can be affected, because of the decline as a braid and because they may put into Israel itself into shekels, only the amount of expenses required for payments in development activities in Israel.

The second group, on the other hand, is more exposed to the fall of the dollar.

All the reports of the companies that are in Israel, their tax liabilities and their management, all depend on the value of the shekel against the dollar.

The change in values ​​and the decline of the dollar, can lead to a decline in financial performance.

In traditional companies, for example, where 100% of the workforce is Israeli, the damage will be stronger than in the high-tech industry, which operates mostly in the international arena.

They export and sell in dollars, but all their payments, whether taxes or salaries, are in shekels.

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