Israel’s semiconductor industry has cemented its role as a global R&D powerhouse, generating $40 billion in exits since 1996 and attracting half a billion dollars in annual funding, according to a new report released Tuesday by Startup Nation Central.
The study, Israel’s Semiconductor Landscape 2025, highlights what it calls the “Two-Engine Paradox,” a model in which multinational R&D centers and local startups together sustain the country’s outsized impact on global chip innovation.
Israeli engineers have been at the forefront of designing technologies that form the backbone of the world’s computing and AI infrastructure. Teams in Israel have contributed to Intel’s Gaudi AI processors, Amazon’s Graviton CPUs and Nitro networking systems, and Nvidia’s data center interconnects.
“Israel’s semiconductor ecosystem has evolved into a global R&D powerhouse,” said Avi Hasson, CEO of Startup Nation Central. “Our engineers design the chips that power AI, cloud infrastructure, and defense systems. The next step is to grow companies that scale independently rather than sell early.”
The sector’s global integration has been underscored by landmark acquisitions, including Intel’s $15.3 billion purchase of Mobileye, Nvidia’s $6.9 billion acquisition of Mellanox, and KLA’s $3.4 billion acquisition of Orbotech. These deals have embedded Israeli innovation into the strategies of the world’s largest technology companies.
Investment patterns further demonstrate the sector’s strategic weight as funding remains resilient.
According to the report, over the past decade, for every $5 invested in US semiconductor startups, $1 was invested in Israeli companies, a ratio of 1:5, compared to the overall 1:15 ratio between Israeli and American VC investment volumes.
“This remarkable figure highlights the strategic weight of Israel’s chip sector and its strong alignment with global capital trends,” the press release about the report said.
Annual private investment, which peaked at $1.2 billion in 2021, has since stabilized at $400–500 million. Median round sizes are two to four times higher than the national tech average, reaching $35 million in 2025, with major financings such as Quantum Machines’ $170 million raise and Retym’s $75 million round.
Critical challenge
The industry employs about 45,000 people, or 9 percent of Israel’s tech workforce, with Intel (9,300 employees) and Nvidia (5,500) among the largest employers. Unlike Israel’s software sector, semiconductor facilities are spread across the country, supporting regional growth and workforce diversity.
But the report warns that the ecosystem faces a critical challenge. While the number of active semiconductor firms has grown by 16 percent over the past decade, the pace of new company creation has slowed as the sector shifts from rapid expansion to capital-intensive consolidation-illustrating the delicate balance between global integration and local entrepreneurship.
“The ecosystem’s reliance on exits, combined with high operational costs, has slowed new startup formation,” said Yariv Lotan, VP of Product and Data at Startup Nation Central. “Its central challenge now is to evolve from a ‘build to exit’ mindset toward a ‘build to last’ model.”
The Semiconductor Landscape 2025 report maps Israeli innovation across the full value chain, from materials and manufacturing to logic and memory ICs, interconnect and networking, and sensing technologies.