The Economist

‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

October 12th 2024

Your essential guide to global business and technology

SUBSCRIBER ONLY

The Bottom Line

Your essential guide to global business and technology

Can Israeli tech withstand a wider war?

Anjani Trivedi
Global business correspondent

About six months after Hamas’s October 7th attack on Israel, officials from the country told me they were keeping a close eye on how investors were feeling about their tech industry.

That may seem like an odd thing to focus on as the country was in the midst of a war—one that had already dragged on longer than previous conflicts in 2006 and 2014. But Israel’s tech industry punches way above its weight at home and globally. It is a big driver of domestic economic activity and a magnet for foreign capital. Policymakers and diplomats cannot ignore it.

At that point in the war, the officials said that investors remained “largely positive” as the industry continued to bustle with activity. Companies in fields such as drone-making that once focused on civilian applications signed big contracts with the Israel Defence Forces. Med-tech firms that had been looking abroad for growth pivoted to supporting mental health and rehab at home. The country’s whizzy cyber-security firms benefited from soaring demand around the world. Venture-capital funding in the second quarter of the year jumped to $4.4bn, having languished post-pandemic.

But Israel has now been at war for a year. And, as I write this week, cracks are emerging in its tech sector. Entrepreneurs’ morale is low and productivity is down. Many worry about the government’s ability to support an economic recovery. Some are talking of setting up shop elsewhere; foreign tech firms have already begun to leave.

In the early days of the war, when funding for Israeli startups stalled, the government rushed to keep the money flowing. But little support has been offered since then. The longer the conflict goes on, the greater the damage will be to Israel’s tech sector—and its reputation as a powerhouse of innovation.

Please write to us with your thoughts at: thebottomline@economist.com.

Fast fact: Between 2018 and 2023 Israel’s high-tech sector accounted for 40% of the growth in the country’s GDP.

Your preview of next week

Mark Doyle
Editor, The World This Week

Monday October 14th
The biennial Paris motor show gets under way. Sagging car sales in Europe are not denting the enthusiasm of carmakers to show off their latest models. Renault is unveiling six new vehicles. BYD is premiering its latest electric car for the European market.

Tuesday October 15th
Goldman Sachs presents results for the third quarter. Net profit rose by 150% in the second quarter, year on year, to $3bn. Bank of America and Citigroup also report. Morgan Stanley publishes on October 16th.

The share price of Walgreens Boots Alliance sank to a 27-year low in June after it reduced its profit forecast and announced more shop closures. The ailing pharmacy chain coughs up its latest earnings.

Wednesday October 16th
ASML’s halo as Europe’s most valuable tech company is slipping a bit, with Deutsche Bank, Morgan Stanley and UBS all downgrading their outlook for the chip-equipment maker. Its share price is down by 15% over the past six months. The company publishes its results.

In July United Airlines cut its outlook for the third quarter, for which it now releases full results. Like others in the industry, it is coping with the end of “revenge travel”, where post-pandemic demand led people to book more trips than they would have otherwise.

September’s inflation reading is published in Britain, the last before the Bank of England’s meeting on November 7th. The annual inflation rate held steady at 2.2% in August.

Thursday October 17th
The European Central Bank is expected to cut interest rates for the third time this year at its meeting. The rate on its main deposit facility is currently 3.5%.

Investors will pore over Netflix’s results for evidence that it can maintain solid growth in subscriber numbers. It added 8m new users in the second quarter, the most for the April-June period since 2020. Some 45% are signing up for Netflix’s cheaper package, which includes advertising, where it is available.

TSMC, which makes chips for Nvidia and Apple, has reported a 39% jump in quarterly revenue, year on year, better than markets had expected. The Taiwanese company publishes its full quarterly earnings.

Friday October 18th
China releases a raft of economic data, including GDP figures for the third quarter and monthly industrial production and retail sales numbers. The government recently announced a series of stimulus measures that cheered markets, but lacked the necessary scale to revive growth.

Japan’s annual inflation rate is expected to fall from the 3% that was recorded for August, which was the highest rate since October 2023.

SLB, formerly Schlumberger, publishes earnings. The world’s biggest oilfield-services provider recently announced a “breakthrough” in its project to extract lithium commercially with less impact on the environment.

Volvo also reports. Like some of its rivals, the carmaker recently abandoned a target to produce only all-electric cars by 2030. “The market’s not really with us,” said its head of global sustainability.

From our Schumpeter columnist

Masayoshi Son is back in Silicon Valley—and late to the AI race

This isn’t the first time the Japanese tech investor has missed the hot new thing

Masayoshi Son is a man of contrasting superlatives. At the height of the dotcom bubble in early 2000 the Japanese technology mogul was briefly the world’s richest person, before losing $77bn in paper wealth, more than anyone before. In 2021 SoftBank Group, his telecoms-and-software conglomerate turned investment powerhouse, reported the biggest annual net profit in the history of Japan Inc, followed a year later by the second-biggest loss. His $20m wager in 2000 on Alibaba, a tatty online marketplace that grew into China’s mightiest e-emporium, counts as one of the best in the annals of venture capital (VC); his later $16bn punt on WeWork, an office-rental startup with tech pretensions, is an all-time dud. He has been called a “genius” and “dumb money”.

Read the full article →

Our latest stories on business and technology

Under fire

Can Israel’s mighty tech industry withstand a wider war?

Its resilience is being tested

Power couple

Big tech is bringing nuclear power back to life

Artificial intelligence needs clean and reliable energy sources

The standards war

China is writing the world’s technology rules

It is setting standards for everything from 6G to quantum computing

A sting in the tail

The front line of the tech war is in Asia

The two superpowers are vying for influence. China will not necessarily win

A titan departs

Ratan Tata, a consequential and beloved figure in Indian business

He reshaped one of India’s most successful conglomerates

Bartleby

When workplace bonuses backfire

The gelignite of incentives

A digital makeover

Can Mytheresa make luxury e-commerce a success?

It reckons it can succeed where Richemont has failed

Also from The Economist

For subscribers

Get all of The Economist’s opinions, alongside By Invitation guest essays and readers’ letters, delivered to your inbox on Sunday mornings.

Was this email forwarded to you? Sign up here.

This email has been sent to: account@kait.dev. If you'd like to update your details please click here. Replies to this email will not reach us. If you don't want to receive these updates anymore, please unsubscribe here.

Join the conversation