Israel Can Lead the Industry 4.0 Revolution, Says Economist
Eugene Kandel, CEO of nonprofit Start-Up Nation Central, believes that Israel can be a leader of industrial tech, even if the local traditional industry stays behind. Israel has two separate economies, and that is OK, he says
Industry 4.0 is a chance for Israel to finally take an active part in a significant global revolution, according to economist Eugene Kandel. A former chairman of the National Economic Council under Prime Minister Benjamin Netanyahu, Kandel is currently the head of Start-Up Nation Central (SNC), a Tel Aviv-based non-profit organization working to promote Israeli tech. Now, he is striving to facilitate connections between local startups and global traditional industrial companies."Israel did not exist during the steam engine revolution and was not yet relevant during the automation revolution, but for this current revolution, we are in the picture," Kandel told Calcalist in a recent interview. In 2015, when Kandel entered his current role, he identified industry 4.0 as a key issue. closed a $110 million series B funding round. A month later, 3D imaging sensor company Vayyar Imaging Ltd. announced a $109 million round. While industry 4.0 investment was still less than 10% of the total venture capital investment in Israeli tech startups in 2019, the interest in the sector is growing, Kandel said. "The global industry is seeing what Israel is doing in autotech," Kandel said. "Automakers realize that they can look to Israel for solutions to the danger posed to them by companies such as Google, who want to make cars a commodity. The local autotech sector has grown from 40 companies in 2011 to 600 today." The industrial sector, according to Kandel, is similar. While Israel is not a hub for heavy industry and infrastructure companies, the country could become a supplier of industrial technologies. But the challenge is immense, Kandel said, primarily because industrial companies tend to be very conservative, and many operations are based on existing systems that operate with old software and old processors. "Advanced industry is mostly operating based on 25-year-old, pre-Pentium processors," Kandel said. "Many of the companies do not want to touch anything for fear it could break down. But when something happens—a hacking, equipment failure, information theft—recovery is hard, and a factory could be out of commission for a long time." Another outdated practice is performing regular maintenance according to procedures written years ago, Kandel said. "If there are technologies that can predict when things will go out of balance, you can avoid unnecessary shutdowns," he said. The fact that Israel lacks major industrial companies could be detrimental to startups, which can find it harder to characterize pain points. "Entrepreneurs are holding a hammer, and everything seems to them like a nail," Kandel said. "Sometimes, it is not a nail, and then you hear comments like 'the technology is wonderful and elegant, but it solves a problem that does not exist,'" he said. With all of Israel's technological prowess, the country's few industrial companies seem to operate unaffected by the 4.0 revolution. "There are two very different economies here that are almost entirely unconnected, and each needs different human resources, knowledge, and finances," Kandel said. "There is the tech industry pushing the world's payoff curve up, and there is the traditional economy that is far below the curve."