This year Israeli hi-tech companies have laid off between 10,000 to 12,000 employees, representing between 10% to 20% of their workforce.
Salaries have fallen by 10% to 30% throughout the sector. Experts say that most of the dismissed workers have found alternative employment in similar jobs or related fields, such as in the computer departments of banks, state or municipal offices or in heavy industry.
The effect of the world economic slump has been felt sharply by Israeli industry. Experts estimate that since the beginning of 2001, some 550 of the country's 2,700 technology companies have shut down.
The number of people seeking to retrain in the hi-tech field has consequently also dropped and the market for new skilled workers in this sector has plunged by 80%.
Some 105 startups have closed down out of approximately 1,200 companies which received venture funding. These closures added another 2,940 people to the ranks of the unemployed, according to organizations which gather information on the sector in Israel.
Edit Padan, general manager of MIT, a subsidiary of Manpower-Israel, said that salaries in the sector have dropped substantially since the beginning of the year - by 10% for experts in research and development, by 20% for workers in programming for the Internet, and by a sharp 30% for those who work in Web site design or in support functions, management and administration.
Industry analysts do not believe the crisis has reached its peak yet and are bracing for a fresh wave of layoffs and closures expected to last for the rest of this year and into the first quarter of 2002, when companies issue their 2001 financial results.
Zeev Holtzman, head of the Giza Fund and chairman of research firm IVC which studies the venture capital sector in Israel, estimated that the number of layoffs in high tech will double by the end of the year and that another 400 companies - a third of the companies financed by venture capital funds and other investment bodies - will be forced to shut down.
According to Padan, "Everyone who is laid off finds work. And if not directly in hi-tech, then in related fields: computer divisions at banks, government offices, municipal offices, factories, at the Electric Corporation and at `establishment' hi-tech companies such as Bezeq, Telrad, El-Op, Elisra and Motorola."
In response to the crisis, the Association of Electronic Industries is trying to prevent a further deterioration in the sector by proposing legislation to encourage capital investment. The association wants to see the establishment of a government investment company that would match private investment dollar for dollar. The association has also suggested offering tax breaks for a limited time.
However, some Israeli venture capital funds which have been freezing investment and waiting on the sidelines for the value of startups to drop have recently decided to return to the market and begin investing again. Among these are Apax, which had earmarked $600 million for investment in Israel and in the past 10 months has not made new investments. It has recently decided to start investing again.