Israel is Becoming a World Hub for Industrial Internet of Things (IIoT) Companies

By Lotan Levkowitz and Ziv Livne

Originally posted to Industry Week: industryweek.com/technology/one-hotter-hubs-iiot-development-israel

The first industrial revolution began in the late 18th century and introduced new manufacturing processes, transitioning from hand production to machines. The second industrial revolution was a phase of rapid industrialization in the final third of the 19th century, characterized by an increasing adoption of steam-powered means of transport, electricity utilization and the adoption of moving assembly lines. These new developments ushered the world into the age of mass production. Then came the 20th century, and linked between computers and automated processes to the industrial world, in what was globally recognized as the third industrial revolution.

In 2011, German professor and businessman Henning Kagerman introduced the term Industry 4.0 to define the next industrial revolution: digitalizing industrial processes by adding smart sensors and robotics in order to create automated cyber physical industrial systems. The term Industrial Internet of Things (IIoT) quickly became the leading buzzword to describe the technological trend. And like all technological trends, it quickly made its way to Israel.

Over the past few years, with a blooming IIoT start-ups scene and more than 50 international companies expanding their scouting, integration and R&D teams in the country, Israel is rapidly becoming the engine that drives the global IIoT industry. Grove Ventures, a leading Israeli venture fund, has conducted a comprehensive research mapping dozens of local companies active in the IIoT field today, divided into eight major categories, as seen on the infographic below: Predictive Maintenance, Operations Optimization, Cyber Security, Logistics Optimization, Robotics, Health/Safety, Sensors and Platforms.

map of iiot companies

The advanced technological solutions which these IIoT companies offer expand production lines’ efficiency, provide better control on manufacturing and maintenance, reduce labor costs and improve the quality of products. Key industrial players who are constantly seeking for added value and competitive advantages are already implementing these advanced technologies in their facilities.

The IIoT Market is Booming

Last year, professional services firm PwC supported the notions that a revolution is on its way. A recent study that the company had published stated that 33% of industrial companies claim that they have already achieved advanced levels of digitization, predicting that global investments are expected to total USD 907 billion per annum until 2020 - around 5% of revenue per year.

The IIoT revolution in Israel is being driven by two key factors. The first, Israel is considered an especially entrepreneurial country and is quick on identifying and adapting new technological trends. On that realm, the IIoT phenomena is no different. For years, Israel has fondly been referred to as a ‘Start Up Nation’, populating the world’s highest number of active startups per capita. In the past 5 years alone, more than USD 44 billion were spent on acquisitions of Israeli startups. A state with such a proven technological record is not going to allow herself to miss the IIoT train. Granted, innovative IIoT local startups are thriving and even the Israeli government started offering a number of incentive plans to support and promote future Industry 4.0 startups.

The second factor which makes Israel a hub for the international IIoT industry is having the right talent and relevant experience. Sensors, industrial control systems and advanced manufacturing processes have been around the Israeli industrial eco-system since the early 1980’s. In recent decades, market leaders such as Applied Materials and Siemens have made notable acquisitions of Israeli Innovative Industrial companies and also opened major R&D centers in the country. Local successful corporates like Iscar (Buyout for $6b) and Orbotech (Nasdaq: ORBK) are among other great examples to the country’s incredible industrial innovation success stories in recent decades.

The country’s Industrial momentum continues with the very recent acquisitions of Servotronix (which develops Motion Control Systems and manufactures standard and customized automation solutions) by the major appliances giant, Midea, as well as of Nurego (which invented a monetization platform) by GE Digital, in hopes to accelerate its IIoT business models.

As IIoT prosperity grows, more and more creative Israeli companies want to take part. As Grove Venture’s research demonstrates, almost 90 new attractive IIoT companies are currently active in the country. 3DSignals is one of them, and in less than two years since its inception, it was able to develop and implement innovative acoustic-based condition-monitoring systems and save millions for its customers. In the automotive industry in particular, Israel has made a name for itself as a global innovation leader with the iconic acquisition of Mobileye for USD 15.3 billion acquisition by Intel. Volkswagen, BMW and Ford (which bought algorithmic solutions company SAIPS last year to help develop self-driving technology) are among the companies that have invested in Israeli companies. Now, the country is interested in conquering additional industries.

The booming Israeli IIoT startup scene provides a great opportunity for international companies and investors who are looking to implement advanced solutions and be a part of the Industry 4.0 revolution. If the country continues to maximize its potential and transform additional industries with cutting edge innovation, it can attract even more global companies, investors and industry leaders, becoming a world hub for IIoT.

Grove Ventures will lead the first IIoT Forum in Tel Aviv on March 21st, 2017, alongside dozens of global and local leaders, startups and investors.

Details about the event could be found here: iiiot.co