Israeli high-tech stays stable as software cuts jobs and hardware expands

A new Israel Innovation Authority survey finds Israel’s high-tech workforce held steady in early 2026 even as software companies cut jobs and hardware firms kept hiring. The report also shows AI is increasingly shaping recruitment and workforce decisions, especially in software.

Why it matters: - Israeli high-tech is not shrinking overall, but the industry is changing fast in ways that affect which workers are needed and which skills are in demand. - The shift matters for employees leaving software roles, because many cannot quickly move into hardware, semiconductor, or infrastructure jobs that require different expertise. - The findings suggest AI is reshaping hiring first, and layoffs later, as companies rethink how much labor they need and what work can be automated.

What happened: - The Israel Innovation Authority, working with Zviran, surveyed 210 high-tech companies in the second half of June 2026. - The companies in the survey employ about 130,000 people in total. - The survey covers companies with more than 50 employees, which account for more than 80% of Israel’s high-tech workforce. - The main takeaway: overall employment in Israeli high-tech remained broadly stable in the first half of 2026 despite a wave of layoff announcements.

The details: - Companies hired employees equal to 8% of their workforce in the first half of 2026. - Layoffs averaged 2.8% of workforce during the same period. - Voluntary resignations added up to 4.3% of employees, leaving total industry employment roughly unchanged. - Software companies had a layoff rate of 6.6%. - Hardware companies had a layoff rate of 1.1%. - Pharma and medical companies posted a 2.7% layoff rate. - More than one-third of high-tech companies expect hiring to decline in the second half of 2026. - Planned hiring fell from 7.2% in the first half of 2026 to 5.9% in the second half. - The planned layoff rate among companies expecting broad-based layoffs rose from 4.1% to 6.4%. - Companies with 50 to 200 employees had the highest layoff rate at 8.7%. - Those mid-sized companies accounted for nearly half of the firms that carried out especially large layoffs. - The survey found a higher layoff rate among Israeli growth companies with international operations than among R&D centers of multinational companies. - Exchange rate pressure was cited by 17.6% of companies that carried out broad layoffs. - Exchange rate pressure was cited by 28% of companies that reduced hiring. - Israel Employment Service data showed about 15,000 jobseekers in tech professions at the same time there were roughly 18,000 open tech jobs. - Central Bureau of Statistics data showed nearly a 7% increase in high-tech employment in the first quarter of 2026. - AI adoption in company products rose from 21% to 30% in six months. - The share of companies that reduced hiring because of AI adoption rose from about 3% to 10%. - The share of companies saying AI was the main reason for layoffs rose from 5% to 7%. - Half of companies planning layoffs said AI is affecting those decisions, up from 29% in the previous survey.

Between the lines: - The survey suggests the labor market is shifting from a headcount story to a skills story. - Software companies face pressure from rapid AI advances, while hardware companies are benefiting from demand tied to semiconductors, computing infrastructure, and other deep-tech areas. - The Israel Innovation Authority sees AI as lowering barriers to entry for small software startups, which could spur a new wave of entrepreneurship. - At the same time, the report points to short-term pain for workers whose roles are becoming less relevant before new jobs fully absorb them.

What's next: - Companies are likely to keep adjusting hiring plans through the second half of 2026 as AI adoption spreads. - The Israel Innovation Authority says continued investment in R&D, human capital, and deep-tech fields will be important to preserve Israel’s innovation edge. - Future hiring is likely to favor workers with skills aligned to AI-enabled workflows, semiconductors, infrastructure, defense tech, and other deep-tech sectors.

The bottom line: - Israel’s high-tech sector is holding steady on paper, but beneath the surface it is being reorganized by AI, sector-specific demand, and a widening split between software and hardware.