The high-tech crisis has reached Israel
Mass layoffs of workers in Israeli high-tech are signs of an upcoming crisis.
Following the record growth of the global tech industry in 2021, many companies have significantly increased their headcount as they relied on overly optimistic growth forecasts. However, in recent weeks, massive layoffs in this area have begun around the world. Israeli companies have also begun to follow the global trend.
Here is a list of Israeli startups and companies that have announced layoffs, and it's updated weekly:
• Israeli start-up AVO announced the layoffs for the first time, saying it was sending 500 employees home, 350 of them in Israel.
• Another Israeli startup, Elementor, said it would send 60 employees home, 15% of its workforce.
• Israeli unicorn Open Web also fires about 10% of the company's employees in Israel, reduces the work week to 4 days and wages. Despite having raised $150 million with a valuation of over $1 billion.
• Startup Cognite will also lay off dozens of employees after it decided to shut down its offensive cyber system project.
• Later, another Israeli unicorn, Trax Technology, announced that it would lay off more than 110 employees (12% of employees), about 50 of them in the office in Israel (25%). At the same time, Trax is preparing for a massive IPO.
• And yet another Israeli unicorn, Cybereason, is laying off over 200 employees in Israel and the US despite having raised $275 million with a $3 billion valuation.
• This week, another Israeli start-up Stream Elements announced the layoff of 170 of its employees (20% of all employees), 70 of them from the office in Israel.
• The largest international corporation Intel freezes hiring for dozens of positions.
• The other day, the Chinese company Alibaba announced the closure of the development center in Israel and lay off 60 employees.
Many Israeli technology companies are trying to hide the fact that they have frozen hiring or cut wages. So why even unicorns with lots of money make significant cuts. Is this industry facing a crisis?
After raising hundreds of millions of dollars last year, dozens of employees have been laid off in recent days. Now that the world seems to be heading for a slowdown and perhaps even a recession, those same high-tech companies are rushing to become more efficient and cut their staff. So it’s too early to talk about the crisis in this particular industry, and the reasons for layoffs are banal: reducing risk during economic instability, saving money in the company’s treasury, keeping the company’s investors calm and preserving talents.
Also recently, another indicator that causes concern is that international and Israeli high-tech companies inside Israel collect only the cream, the so-called "top talents" of technical specialties, and not technical positions are taken outside of Israel. Former head of the National Economic Council Professor Eugene Kandel has criticized Israel's transformation into a global "research and development center" (R&D) of global high-tech corporations.
There are about 400 R&D centers of international companies operating in Israel, Kandel said, competing for the most valuable resource - high-tech specialists, creating a labor shortage in local high-tech. At the same time, they practically do not invest in the service shell, transferring it abroad.
If earlier each high-tech specialist provided an average job for two more employees, now this figure has decreased to 0.8 additional jobs per high-tech specialist, and in R&D centers of international companies - to 0.3 jobs. And recently, Israeli companies are following the same path, leaving only R&D in Israel.
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