Bordered by Lebanon, Syria, Jordan, and Egypt, the State of Israel is connected to even more countries through the global supply chain. In 2021, Israel’s main import partners were all over the map, from China to the US, Turkey, Germany, and Switzerland. For exports from Israel, in 2022, the US received the most exports, followed by China, India, Germany, and Ireland.
The Israel-Hamas war has resulted in a growing number of casualties and raised concerns about its impact on this ecosystem of international commerce. Resilinc data projects that $2.3 billion in potential revenue is at risk for the industries we monitor—encompassing over 1,300 suppliers, 2,100 sites, 3,200 products, and 9,500 parts. Depending on how long the conflict continues, it could cause significant disruptions across several industries, including energy, logistics, high-tech and semiconductors, pharmaceuticals and medical supplies, and jewelry.
This blog will explore how each industry could be impacted and what companies can do to mitigate supply chain risks proactively.
Logistics Networks, Ports, and Oil
Commercially, several airlines have suspended or canceled flights in and out of Israel, such as United, Delta, American Airlines, and Lufthansa. As for shipments, UPS and DHL currently have daily international service to and from the country’s main airport, Tel Aviv. FedEx temporarily paused flights but has since resumed both inbound and outbound routes.
Israel’s leading port, the Port of Haifa—where 20 million tons of cargo pass through each year—remains open. However, the Port of Ashkelon, which houses Israel’s most significant oil terminal, shut down on October 9. Chevron, one of the largest oil companies in the world, has stopped production at its offshore Tamar natural gas field, which meets 70% of Israel’s energy needs for power generation. Because of this, a prolonged shutdown could lead to a drop in Israeli gas exports to its neighbors—Egypt and Jordan—and squeeze an already tight global gas market.
Resilinc recommends that companies take steps to organize alternative shipping methods, such as rerouting to nearby open ports and airports. Open ports close to Israel include Ashdod, Haifa, Latakia, Beirut, and Tripoli. Land and rail operations are currently continuing as usual, which are also viable options. Companies that need to move products out of impacted regions may have to pay insurance premiums.
Israel’s high-tech industry ranks as one of the country’s top GDP contributors, accounting for 18.1% of Israel’s GDP in 2022. To gain perspective, the US high-tech share of GDP was only 9.3% in 2021—nearly half that of Israel. Of all salaried employees in Israel, 14% work in high-tech and technology roles. A handful of multinational companies operate in Israel, including IBM, Google, Microsoft, and Facebook.
There are also several advanced semiconductor companies, like Intel, Nvidia, and Apple, with fabs in Israel. Tower Semiconductor operates two factories and produces approximately 50,000 wafers monthly, mainly for the automotive and consumer industries. Intel—the country’s largest private employer and exporter—has three development centers and plans to open a new $25 billion factory near Gaza in 2027. Right now, these factories continue to operate normally, but the conflict could disrupt operations, leading to global chip delays.
Israel imports about $2.08 billion and exports $5.09 billion in integrated circuits commonly found in electronic devices, such as audio equipment, radio transceivers, communications, sensors, and medical equipment. The country is also a major exporter and importer of the products that use these integrated circuits, like broadcasting equipment, medical instruments, and other measuring instruments. Depending on how long the conflict continues, each of these verticals within the high-tech industry could experience significant supply chain disruptions.
The region serves as a major producer of generic pharmaceuticals and medical supplies. Israel contains nearly 700 medical device companies that make everything from ultrasounds to neurostimulation devices used to treat Alzheimer’s disease. Currently, the top pharma companies in Israel include Taro Pharmaceuticals, Teva Pharmaceuticals, OrCam, UroGen Pharma, Kamada Pharmaceuticals, and MediWound.
India’s pharmaceutical companies have not experienced a significant change in export revenues due to the crisis. Teva, one of the world’s largest generic drug producers, has not seen an impact, noting that sales in Israel only account for 2% of global revenue. For now, major companies are continuing to monitor the situation as shortages in critical medications and medical equipment are still a possibility.
Israel is a major global player in the diamond market, leading many to wonder how the jewelry industry will be impacted. Diamonds are the top import ($6.73 Billion) and the top export ($9.06 Billion) in Israel. Most of the diamonds imported into Israel come from India, with a worth of $1.2 billion in imports last year. On October 9, India’s Gem and Jewelry Export Promotion Council (GJEPC) expressed concerns about how the Israel-Hamas war would impact the Indian jewelry industry, which cuts and polishes 90% of rough diamonds globally.
India isn’t the only country connected to Israel’s diamond exports; approximately 50% of diamonds purchased in the US (in terms of dollars) come from Israel. Israel is also home to the Israel Diamond Exchange, where about one-third of global, rough diamond production passes through every year. Israel is globally known for developing new technologies and systems for polishing diamonds. For now, the jewelry industry has not been affected by the conflict.
What Should Companies Do?
Israel is home to various specialized industries and products, from semiconductor wafers used in broadcasting equipment to world-renowned polished and cut diamonds. Trade in and out of Israel has slowed, but industries are not experiencing major revenue impact yet. For the time being, many companies are figuring out which steps to take next.
However, the time to prepare for a disruption is now. Resilinc recommends that companies map the supply chain to determine if parts are tied to the affected region. Companies can leverage Autonomous AI Mapping for a most-likely view of the supply chain. Then, run what-if scenarios and send assessments to suppliers. Finally, if possible, organize alternate shipping methods, such as rerouting to open ports and airports.
For more information on the developing conflict and its impact on the supply chain, we’ve gathered the latest data on the supply chain impact of the Israel-Hamas War in our latest report, including the number of potentially impacted sites, parts, and how much revenue is at risk. Download the Special Report here to dive deeper: Israel-Hamas Crisis: Expert Insights and Best Practices to Mitigate Disruptions.