Saifun's NASDAQ IPO valued the firm at $675m. It raised $121m

Last autumn, the Israeli flash memory chip company Saifun's initial public offering (IPO) on the NASDAQ stock exchange valued the firm at $675 million.

NASDAQ is the largest electronic screen-based equity securities market in the United States. With approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other US market. It is home to companies that are leaders across all areas of business including technology, retail, communications, financial services, transportation, media and biotechnology.

NASDAQ is not only important as a source of capital, it also gives credibility to a foreign company seeking to break into the key US tech market including providing potential for developing strategic alliances.

Israel is second to America in the number of companies listed on NASDAQ, and the Economist magazine says that the country attracts twice the number of venture-capital (VC) investments as the whole of Europe, according to Ed Mlavsky, a veteran of the Israeli technology industry and the chairman and founder of Gemini, a big Israeli VC fund that was one of the investors in Saifun. In 2003, 55% of Israel 's exports were high technology, compared with the OECD average of 26%. Tech giants such as IBM, Motorola and Cisco have research centres in Israel , which is also where Intel developed its Centrino chip.

The Intel Corporation, the world's largest chip maker, announced in December 2005 that it would invest $3.5 billion to build a new plant, adjacent to an existing one that makes Pentium 4 chips, at an industrial park in Kiryat Gat, southern Israel.

Intel already has six design and production facilities in Israel and more than 6,000 workers, making it one of the country's largest private employers. It will be adding at least 2,000 jobs at the new plant, which will produce 12-inch chip wafers, the company says.

"Intel has a long history of high-tech manufacturing in Israel, and this is a natural continuation of that," said Alex Kornhauser, the general manger of Intel's operations in Israel. "When the manufacturing requires highly skilled people, we believe we have a competitive advantage here."

Israel agreed to give Intel incentives totaling $525 million, according to the New York Times. The Israeli government offered Intel a 10 percent tax rate, compared with 35 percent in the United States.

Parallels and Contrasts with Ireland

The high tech sector is also important in the Irish economy and Intel is also a key player. However, Ireland is much more dependent on foreign firms who account for 90% of the country's exports.

Last August, the State agency Enterprise Ireland in a report on its Seed and Venture Capital Programme, said that €133m had been invested in 75 companies since 2001 - simply equivalent to a few downpayments on the billions that have been invested in property by Irish investors in the UK and mainland Europe.

One Irish company has listed on NASDAQ in the current decade. Travel software company Datalex delisted in April 2002 after eighteen months on NASDAQ, when its share price crashed to below $1. One time internet star and FTSE 100 index member, Baltimore Technologies delisted in 2001. Parthus Technologies was acquired by Ceva in 2002. Education software company Riverdeep went private and delisted in 2002. Hibernia Foods delisted in 2003.

Of the remaining Irish companies on NASDAQ, low fares airline Ryanair and builiding materials group CRH, are undisputed international stars. Software companies IONA and Trintech, have reported losses in 2005.

Israel with a population of 6.9m has 71 companies on NASDAQ. Ireland with 7 companies listed, has a population of 4.1m.

Why Israel is the "second Silicon Valley" 

Israel's military has been to the forefront in adopting new technology, and it works closely with civilian companies. Israeli men and women are required to perform military service after high school and many gain experience working with  high-tech systems, which leads directly to future careers.

The Economist says that Israel has 135 engineers per 10,000 employees, compared with 70 in America , 65 in Japan , and 28 in the UK. The magazine says that naturally, cultural factors play a part too. Around 5% of start-ups in America are headed by repeat entrepreneurs compared with 30% in Israel. It says that the bad news for other countries that wish to encourage the development of their technology industries is that few of these factors can be replicated. Singapore 's attempt to establish itself as a biotechnology centre faces the challenge of encouraging risk-taking and entrepreneurialism in a highly conformist society. And the UK is hardly likely to introduce conscription in order to boost the fortunes of the technology cluster around Cambridge University . In technology, as in so many other ways, Israel is a special case.

No silver bullet for success

In this week's issue of Newsweek magazine, Fareed Zakaria writes: Traveling around Asia for most of the past month, I have been struck by the relentless focus on education. It makes sense. Many of these countries have no natural resources, other than their people; making them smarter is the only path for development. China, as always, appears to be moving fastest. When officials there talk about their plans for future growth, they point out that they have increased spending on colleges and universities almost tenfold in the past 10 years. Yale's president, Richard Levin, notes that Peking University's two state-of-the-art semiconductor fabrication lines—each employing a different technology—outshine anything in the United States. East Asian countries top virtually every global ranking of students in science and mathematics.

But one thing puzzles me about these oft-made comparisons. I talked to Tharman Shanmugaratnam to understand it better. He's the minister of Education of Singapore, the country that is No. 1 in the global science and math rankings for schoolchildren. I asked the minister how to explain the fact that even though Singapore's students do so brilliantly on these tests, when you look at these same students 10 or 20 years later, few of them are worldbeaters anymore. Singapore has few truly top-ranked scientists, entrepreneurs, inventors, business executives or academics. American kids, by contrast, test much worse in the fourth and eighth grades but seem to do better later in life and in the real world. Why?

"We both have meritocracies," Shanmugaratnam said. "Yours is a talent meritocracy, ours is an exam meritocracy. There are some parts of the intellect that we are not able to test well—like creativity, curiosity, a sense of adventure, ambition. Most of all, America has a culture of learning that challenges conventional wisdom, even if it means challenging authority. These are the areas where Singapore must learn from America."

Shanmugaratnam also pointed out that American universities are unrivaled globally—and are getting better. "You have created a public-private partnership in tertiary education that is amazingly successful. The government provides massive funding, and private and public colleges compete, raising everyone's standards." Shanmugaratnam highlighted in particular the role that American foundations play. "Someone in society has to be focused on the long term, on maintaining excellence, on raising quality. You have this array of foundations—in fact, a whole tradition of civic-minded volunteerism—that fulfills this role. For example, you could not imagine American advances in biomedical sciences without the Howard Hughes Foundation."

Zakaria says that despite all the praise Shanmugaratnam showered on the States, he said that the US educational system "as a whole has failed." "Unless you are comfortably middle class or richer," he explained, "you get an education that is truly second-rate by any standards. Apart from issues of fairness, what this means is that you never really access the talent of poor, bright kids. They don't go to good schools and, because of teaching methods that focus on bringing everyone along, the bright ones are never pushed. In Singapore we get the poor kid who is very bright and very hungry, and that's crucial to our success.

"From where I sit, it's not a flat world," Shanmugaratnam concluded. "It's one of peaks and valleys. The good news for America is that the peaks are getting higher. But the valleys are getting deeper, and many of them are also in the United States."

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