Defense Industry
Israel produces a wide range
of products from ammunition, small arms and
artillery pieces to sophisticated electronic
systems and the world's most advanced tank.
Having to fight five major wars in its first four decades,
Israel built a comprehensive standing army – the Israel
Defense Forces (IDF) - and furnished it with an arsenal
of highly advanced military hardware. The government, which
owns three major defense firms, also encouraged the formation
of private companies to equip the IDF. The development of
a sophisticated defense industry inevitably led to exports,
which today account for a majority of its revenues and allows
the country's defense industry to compete against some of
the largest companies in the world for foreign contracts,
in addition to producing many of the arms needed for Israel's
own defense.
Faced with a shrinking market for military
hardware over the last decade and a half,
Israeli defense concerns have made a concerted
effort to employ their research and development
teams in devising products for non-military
markets and, more frequently, in adapting
defense technology for civilian applications.
Indeed, many of the most innovative products
developed by Israel's civilian high tech industry,
especially in the field of telecommunications,
trace their origins to military technology.
The Israel Defense Industry has experienced dwindling exports since 2012 due to greater international competition leading to increased foreign defense spending and domestic defense spending cuts. Defense industry leaders presented a letter to Prime Minister Netanyahu in November 2015, in which they stated that they are in a “clear crisis,” and defense exports would only amount to $4 - 4.5 billion in 2015. Israeli defense exports totalled $7.5 billion in 2012, and subsequently dropped to $6.5 billion in 2013 and $5.5 billion in 2014.
Israeli defense exports have experienced a steady decline since 2012.
Source: Israel Ministry of Defense
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Born Of Necessity
The modern defense industry in Israel was
set in motion in the early 1920s. Faced by an increasingly
hostile Arab population, the Jewish community began to manufacture
homemade hand grenades and explosives. In the early 1930s,
members of the Haganah (the pre-state Jewish underground defense organization) set
up clandestine small arms factories, which became the Israel
Military Industries (IMI) in 1948. In the first two decades
after independence, IMI produced many of the basic weapons
used by the IDF, including the Uzi sub-machine gun. The more
costly aircraft and other advanced weapons were procured
from foreign suppliers, principally France.
The major catalyst for Israel's metamorphosis from a small-arms
manufacturer to a producer of sophisticated military systems
came after the 1967
Six-Day War. During the war, France imposed an embargo
on arms sales to Israel, including the Mirage planes already
on order from the Dassault aircraft factory. When the United
States became the primary supplier of combat aircraft, Israel
began to develop its own production capability. The government-owned
Israel Aircraft Industries (IAI), founded as a maintenance
facility in 1953, soon began developing and assembling a
variety of its own aircraft, including the Kfir - a replacement
for the Mirage - as well as the Arava and Nesher planes.
At the same time, IAI's contacts with US suppliers advanced
from subcontracting jobs to joint ventures with Boeing and
Lockheed-Martin. As a result, employment at IAI grew rapidly
from 4,000 to a peak of 14,000 in the late 1980s.
The growing sophistication of Israel's defense
industry gave it the confidence to develop
an all-Israeli military aircraft, the Lavi.
Over the first half of the 1980s, IAI developed
avionics, electronics and weapons systems
for the aircraft, and by 1986 the first prototype
had taken to the air. However, the government
concluded that it was unable to finance such
an ambitious undertaking, and the project
was canceled a year later. Shorn of the Lavi,
IAI began to develop a variety of products
in the military and civilian spheres - such
as advanced radar systems, precision weapon
systems, unmanned air vehicles (UAVs) and
commercial and military aircraft conversion
- many of which were based on the technology
developed during the Lavi project.
Industry Players
There are approximately 150 defense firms
in Israel, with combined revenues of an estimated
$3.5 billion. The three largest entities are
the government-owned IAI, IMI and the Rafael
Arms Development Authority, all of which produce
a wide range of conventional arms and advanced
defense electronics. The medium-sized privately
owned companies include Elbit Systems and
the Tadiran Group, which focus mainly on defense
electronics. The smaller firms produce a narrower
range of products. In all, the industry employs
close to 50,000 people, all of whom share
a commitment to high levels of research and
development and the ability to make use of
the IDF's combat experience.
Israel's defense exports are coordinated
and regulated through SIBAT - the Foreign
Defense Assistance and Defense Export Organization
- which is run by the Ministry of Defense.
SIBAT's tasks include licensing all defense
exports as well as marketing products developed
for the IDF, from electronic components to
missile boats and tanks. Each year, SIBAT
publishes a defense sales directory, an authoritative
guide to what the industry has to offer.
Despite their far-reaching client base, even the biggest
local firms are relatively small players in the global defense
market. With increasing competition from the major world
aerospace players, Israeli companies tend to specialize in
niche markets, or have sought to combine forces through mergers
or joint marketing efforts. In addition, declining global
defense spending has provided them with new opportunities
as foreign governments seek to upgrade their existing arsenal
rather than buy new equipment. This policy is typified by
the Phantom 2000, a sweeping modernization of the F-4
aircraft that Israel acquired from the US in the early
1970s.
The Government Sector
In the wake of the Lavi's cancellation, IAI diversified
and expanded with funding from the United States, developing
the Amos and Ofeq satellites and the world's first operational
anti-missile missile system, the Arrow.
IAI's unmanned air vehicles (UAV or pilotless aircraft) systems,
including the Hunter, have now become standard for military
establishments in many countries around world. The company
is also engaged in the repair and maintenance of aircraft
and helicopters, and in upgrading aircraft with state-of-the-art
avionics. It also designs, develops and manufacturers naval
and ground systems, electronic warfare and radar equipment
and missiles. Company sales in 2000 amounted to $2.18 billion,
of which exports accounted for $1.7 billion. In the same
year, IAI signed some 1,600 new contracts worth approximately
$2.6 billion.
Israel Military Industries (IMI) was founded
in 1933, as a secret small-arms plant. After
the establishment of the State in 1948, it
was operated by the Ministry of Defense, developing
and manufacturing assault weapons - from the
classic Uzi sub-machine gun to the Tavor assault
rifle - heavy ammunition, aircraft and rocket
systems, armored vehicles like the Merkava
tank, and integrated security systems. In
1990, IMI was converted into a government-owned
company. Altogether IMI manufactures some
350 products and employs over 4,000 people.
In addition to Israel and the US, IMI has
distributors in a number of countries, including
Norway, Belgium, the Philippines and Greece.
Some 60% of its revenues, worth approximately
$550 million, come from exports.
The third government-owned defense firm,
the Rafael Arms Development Authority, developed
and now manufactures Python and Popeye "smart"
airborne missiles, both of which have co-production
agreements with major US aerospace companies.
In addition, its products include such varied
categories as passive armor, naval decoys,
observation balloon systems, acoustic torpedo
countermeasures, ceramic armor, air-breathing
propulsion, and air-to-air, air-to-surface
and surface-to-surface missiles.
The Private Sector
Elbit Systems, based in Haifa,
develops, manufactures and integrates advanced, high-performance
defense electronics systems, focusing on upgrade programs
for aircraft and armored vehicles. The company also manufactures
command, control and communication (C3) systems, and upgrades
in weapons platforms and electronic systems and products
for both Western and former Eastern bloc countries. In 2000,
Elbit Systems merged with another major private-sector defense
concern, El-Op Electro-Optics Industries Ltd, and combined
sales reached $591 million, up from $436 million the previous
year.
The second major private sector defense firm
is the Tadiran-Elisra Group, whose subsidiaries
specialize in defense electronics. The group's
Elisra Electronics offers a range of electronic
warfare systems for the military, including
radar warning systems, active countermeasure
systems, comprehensive self-protection systems,
ESM and ELINT systems, and sophisticated communication
links complemented by extremely lightweight
components and super components. It employs
a staff of over 800, two thirds of whom are
engineers. Tadiran Electronic Systems designs
and produces a wide range of military applications,
including intelligence, reconnaissance and
electronic warfare and specialized naval communication
systems, all tailored to customer specifications.
Tadiran Spectralink specializes in pilot-rescue
electronic equipment while BVR Systems develops
innovative flight simulators for fighter pilots.
The group, which is controlled by Koor Industries,
announced sales of $284 million in 2000.
In addition to Elbit and Tadiran-Elisra,
there are scores of smaller, more specialized
defense firms in the private sector, including:
Cyclone Aviation, which upgrades helicopters
and makes aircraft components; Urdan Industries,
which through its Associated Steel Foundries
makes many of the components of the Merkava
tank; Magal Security Systems, whose products
include sensors for security perimeter fences
and explosive-detection devices for airports
and other public facilities; BVR Technologies,
which produces airborne collision-avoidance
security systems, trainers for pilots and
for the use of "smart" weapons,
and a variety of simulators for combat training
and pilot debriefing; the Elul Group, a complex
of companies which specialize in development
and coordination of defense business for Israeli
firms abroad, and for international firms
in Israel; RSL Electronics, which produces
both airborne electronics systems for airplanes
and helicopters and muzzle-velocity radar
for field artillery; and Soltam, which makes
both mortars and heavy artillery pieces as
well as Israel's most popular line of stainless
steel kitchen equipment.
Civilian Markets
Since the end of the Cold War, the global
defense industry, including the IDF, has had
to cope with declining military spending.
In response, many private companies have either
merged or reduced staff, or diversified into
civilian markets, with some companies fully
spinning off their civilian activities into
separate businesses. Many of the high technology
products designed by Israeli companies for
such areas as the Internet, medical electronics
and robotics, are based on technology originally
developed by the IDF or the defense industries.
Friendly Robotics is one notable high-tech
start-up that traces its origins to the army.
Its top executives worked in army technology
units and the company's robot lawnmowers are
based on advanced missile guidance technology,
providing accurate positioning and navigation
functions to perform its tasks. Among the
few private sector defense firms with civilian
activities, Elisra designs, develops and produces
electronic and microwave applications for
the commercial market.
In 1968, IAI acquired the rights to manufacture
the Jet Commander executive aircraft from
the US company Rockwell, which eventually
evolved into the IAI's Astra. In the 1990s,
IAI began producing the Galaxy executive jet
in partnership with the Pritzker family of
Chicago. In April 2001, the international
aerospace firm General Dynamics contracted
to purchase the Galaxy firm for approximately
$600 million. In addition, in the late 1970s
Bedek, a division of IAI specializing in aircraft
maintenance, began overhauling and refitting
Boeing 707 airliners, and today the upgrade
of commercial aircraft has become a major
business for IAI. The civilian content of
the new contracts signed in 2000 was worth
$1.1 billion, or 42% of total new contracts.
IMI has fewer civilian businesses but has
developed technology for electronic wallets
and computerized payment systems.
Rafael develops military technologies for
civilian use through its Rafael Development
Corp., a joint venture with the private sector
Discount Investment Group. One of these projects
used miniaturization and guidance techniques
to produce a transmitter and camera the size
of a vitamin capsule. The capsule is swallowed
by a patient and pictures of the gastrointestinal
tract are then taken by the camera for use
by diagnosticians, substituting for invasive
diagnostic procedures. The system, which was
developed by Given Imaging, was the brainchild
of a missile guidance expert.
Chariot of Fire
During the 1973
Yom Kippur War, Israeli armor suffered heavy losses from
Egyptian and Syrian wire-guided anti-tank missiles. The high
casualty rate spurred the IDF, which had previously depended
on US-made Patton and Sherman tanks and British Centurion
tanks, to develop the Merkava (Heb., chariot), considered
one of the world's most effective and safest battle tanks.
Development of the Merkava was headed by
Gen. Israel Tal, a former Armored Corps commander.
Tal's team sought to design a tank that provided
maximum protection to the tanks crew. One
element of that defense is the placement of
the tank's engine at the front of the vehicle,
where it serves as a shield for the personnel
compartment. This in turn provided more space
in the vehicle's rear, which can be used to
carry up to six extra soldiers. In addition,
a special "canopy" protects the
commander from indirect fire; the turret and
the hull are fitted with a modular armor system
that can be changed in the field; and the
forward section of the turret is fitted with
additional blocks of armor that provide extra
protection against the latest generation of
anti-tank missiles. A "skirt" of
chains with ball weights is attached to the
lower half of the turret, causing incoming
projectiles to detonate on impact with the
chains instead of penetrating the turret ring.
The tank became operative in 1979, and was
first employed in the 1982 Operation "Peace
for Galilee". The Mark I model was succeeded
by the Mark II in 1983, which was replaced
by the Mark III in 1990. Among the features
of the Mark III are a new suspension system,
a 1200-horsepower engine and new transmission,
a more powerful main gun, and ballistic protection
provided by special armor modules. The main
120-mm gun, developed by Israel Military Industries,
is enclosed in a thermal sleeve that increases
accuracy by preventing heat distortion.
Mark II and Mark III tanks are currently
in service in the IDF; a Mark IV model, with
additional safety and fire-control features,
is currently being developed. It will include
a new compressed-gas recoil system and thermal
sleeve for the 120-mm gun, to enable the firing
of enhanced kinetic energy ammunition. With
the exception of the engine, all systems and
assemblies of the Merkava tanks are of Israeli
design and manufacture.
Sources: Israeli Ministry of Foreign Affairs;
Opall-Rome, Barbara. “Israeli Executives Warn of Industrial Crisis,” Defense News (November 12, 2015)
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