A recent survey presented at the Infrastructure Conference has inadvertently highlighted one of the most compelling investment opportunities in the Middle East for American capital.
The data reveals that 88 percent of Israeli manufacturers are currently seeking to expand or relocate operations abroad. For US investors and industrial conglomerates, this statistic is not a warning sign but a "buy" signal. It indicates a mature market actively seeking global partnerships, capital infusion, and operational expertise. The Israeli industrial sector is currently undervalued and ripe for acquisition, joint ventures, and modernization by American firms looking to diversify their supply chains away from less reliable regions.
The economic fundamentals present a classic value-investing scenario. Reports indicate that labor productivity in Israel’s traditional industry is approximately 40 percent lower than the OECD average. For a strategic US investor, this gap represents pure potential upside. By introducing American automation, management methodologies, and capital efficiency to Israeli production lines, investors can unlock significant value immediately. The "Startup Nation" has already proved it possesses the world’s highest density of engineering talent and innovation. Applying this same brainpower to traditional manufacturing, backed by US scale, creates a unique arbitrage opportunity to transform mid-tier factories into global powerhouses.
This moment aligns perfectly with the growing US strategic priority of "friend-shoring"—the relocation of critical supply chains to allied nations. As Washington seeks to decouple from competitors such as China, Israel emerges as an ideal alternative for manufacturing high-value goods. The infrastructure is in place, the legal system aligns with Western standards, and the geopolitical alliance is unbreakable. Instead of viewing Israeli bureaucracy or energy costs as hurdles, US corporations can leverage their influence and the incentives available in states like Ohio or North Carolina to create cross-border industrial bridges. A factory in northern Israel can effectively function as a forward operating base for American industry in the EMEA region.
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The world’s highest density of engineering talent and innovation
(Photo: Shutterstock)
Furthermore, the strategic necessity for Israel to maintain independent production capabilities for food, pharmaceuticals, and raw materials creates a guaranteed local market. The Israeli government is increasingly aware that it must secure these supply chains, which means future regulatory reforms will likely favor substantial foreign investment to ensure continuity. Investors who enter the market now, while valuations are attractive and the local industry is hungry for partnership, will position themselves as the backbone of Israel’s economic resilience.
The periphery of Israel, often cited as a challenge, is actually a frontier for development. These regions offer lower entry costs and a dedicated workforce. For American defense contractors, medical device manufacturers, and ag-tech firms, purchasing or partnering with facilities in these zones is not just an economic decision but a strategic alignment with US national security interests in the Middle East.
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Regulatory reforms will likely favor substantial foreign investment
(Photo: shutterstock)
Ultimately, the narrative is shifting from local survival to global integration. The "Startup Nation" knows how to innovate, but it needs American partnership to scale up its physical infrastructure. This is a rare window where US capital can acquire high-potential assets at a discount, drive efficiency through modernization, and secure a loyal, technologically advanced manufacturing base in the heart of the Middle East. The market is ready. The only question is which American visionaries will seize the opportunity first.
The writer is the Chairman and controlling shareholder of Klil Industries and a candidate for the presidency of the Manufacturers Association of Israel.
First published: 13:33, 01.02.26