Traditionally Israel spends a significant amount of funds on defence. According to the Stockholm International Peace Research Institute (SIPRI), Israel spends almost on average 6.3% of its Gross Domestic Product (GDP) on defence for the period 2006-2015. This trend was reaffirmed as the revised defence budget for 2016 reached 76.31 billion Israeli Shekel –ILS- (approximately 16.6 billion US dollars). This actually highlights the determination of the Israeli government to support a defence budget which will ensure that the armed forces will be able to deliver their core capabilities.

Despite its small size and overwhelming political problems, and perhaps even because of them, Israel has succeeded in developing what can be described as a defence industry with comprehensive capabilities in the land, air and naval directions. This may be attributed in part to the unmatched pool of highly skilled workers and the world-renowned research and academic capabilities that the country has. The Israeli defence industry produces a wide range of products ranging from ammunition, small arms and artillery pieces, to sophisticated electronic systems, UAVs and advanced Main Battle Tanks, such as the Merkava. The quality and versatility of the products manufactured in Israel, have drawn the attention of customers worldwide and currently more than 70% of the defence industry products are exported.

The starting point for the metamorphosis of the Israel’s Aerospace and Defence industry was 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. As a result Israel started to develop its own industrial capabilities. Driven from the outmost motive of survival, the Israeli Aerospace and Defence industry flourished and progressively became one of the most competitive worldwide.

Engineers with combat experience gained from the obligatory military service in the Israeli Defence Forces (IDF) ported a significant advantage to the national defence industry. There is an almost symbiotic relationship between the Israel Defence Forces (IDF) and senior defence industry engineers and employees. Most of them are former officers of the IDF and many continue to serve in the reserves. This provides an additional advantage to the Israeli defence industry, the reason being that employees can convert their accumulated combat experience into technological innovation. Additionally, the Army plays the role of a “training school” as it actually performs a nationwide screening program through which it identifies young people with talent in advanced technologies and puts them through rigorous training via elite programs and other military functions. Furthermore, the Army aids young people to establish networks of contacts that often form the basis for later partnerships within the industry.

According to SIBAT, the Israel Ministry of Defence’s (MoD) International Defence Cooperation directorate, there are currently 48 local companies with capabilities in the Aerospace sector, 31 with capabilities in the Naval domain, 82 with capabilities in the Land sector, 30 in unmanned systems and robotics, 59 in the C4I & Communications sector, 34 in ISR (Intelligence, Surveillance, and Reconnaissance), 30 in the sub-systems and components sector, while 208 provide services and products to the Homeland Security (HLS) sector.

Israel’s innovative aerospace systems include advanced aerostructures, weapon systems and a wide range of sensors and avionics such as EO (Electro-Optical), radar and electronic surveillance, used for targeting, reconnaissance and self-defence. Such systems are integrated in the world’s most advanced fighter aircraft, including Lockheed Martin’s F-35 and F-16, Boeing’s F-15 and F/A-18, Sukhoi Su-30, Dassault’s Mirage 2000, the Eurofighter Typhoon, Saab’s Gripen and more.

One specific domain in which the Israeli aerospace industry excels, is that of the production of UAVs. It is indicative that the country is the largest exporter of drones worldwide. Between 2010 and 2014, it delivered 165 units across the globe. The US came second with 132, followed by Italy’s 37 units. Furthermore, Israel accounted for the vast majority (60.7%) of drone exports worldwide, between 1985 and 2014.

Israeli unmanned vehicles are operating in Latin America, the Indian Ocean, Europe, Asia, Africa, and the South Pacific.

Additionally, the Israeli defence industry builds and equips manned and unmanned platforms used by navies around the world, so as to maintain offensive and defensive naval capabilities, providing situational awareness, command and control of combat systems and naval special operations.

The Israeli aerospace sector is also heavily involved in the development of the F-35 fighter aircraft, as the Middle East country is a key contributor to the development, production, and sustainment of the F-35 program. Amongst other items, the Israel Aerospace Industries (IAI) manufactures the F-35 Joint Strike Fighter Outer Wings (ship-sets), while a joint venture between Elbit Systems and Rockwell Collins supplies the F-35 Helmet Mounted Display (HMD).

In the land sector, the Israeli industry manufactures a wide array of land platforms and equipment, ranging from the Merkava Mk4 Main Battle Tank (MBT) and the Namer armoured Infantry Fighting Vehicle (IFV), to precision missiles and guided projectiles, advanced electronics systems, robotic systems, lifesaving kits, sophisticated weapons and ammunition.  

In the naval sector, the Israeli defence industry has the ability to manufacture small to medium sized vessels, with highly integrated combat systems and exceptional weapons-per-ton ratio. One such vessel is the Super Dvora Mk III-class patrol boat, manufactured by IAI. The SAAR 4 and 4.5 Class Fast Missile Boats are another type of vessel produced locally by the Israeli Shipyards. SAAR Fast Missile Boats have been operational with many navies worldwide, namely the Chilean, South African, Sri Lankan, Mexican and Greek.  

Another sector in which Israeli companies excel, is that of cyber security. In the cyber domain, Israeli specialists offer a wide range of related solutions, including telecommunication and network security technologies, financial processing and data security technologies, and communications surveillance. Israel hosts R&D centres of some 40 major multinational IT companies, such as IBM, Cisco, and GE. Annual exports of the sector amount to more than 3 billion USD (2013), representing 10% of the global sales and 20% of the global investments in the domain.