In the industrial sector, civilian expenditure on R&D and the number of scientists and engineers engaged in industrial R&D have grown abundantly over the past two decades.

Israel's industrial R&D, with a high concentration on electronics, is mainly carried out in a small number of large firms. These R&D-intensive companies have been a major source of industrial employment and exports over the years.

Fostering the growth of such enterprises, both large and small, is the focus of Israel’s industrial strategy. The government promotes R&D in industry within the framework of the Law for the Encouragement of Research and Development, implemented by the Chief Scientist’s Office of the Ministry of Industry, Trade, and Labor which in 2000 funded some 1,200 projects. R&D-related products comprise more then half of total industrial exports (excluding diamonds).

Electronics, limited until the late 1960s mainly to consumer goods, has branched out into more sophisticated technological developments, both military and civilian.

In communications, R&D-based applications include the digitalizing, processing, transmitting, and enhancing of images, speech, and data. Products range from advanced telephone exchanges to voice messaging systems, telephone line doublers, and a vast array of Internet applications.

Optics, electro-optics, and lasers have been growing rapidly as industrial fields. Israel is a world leader in fiber-optics, electro-optic inspection systems for printed circuit boards, thermal imaging night-vision systems, and electro-optics-based robotic manufacturing systems.

Computer-based equipment, mostly in software and peripheral fields, has been developed and produced. In printing and publishing, Israeli-made computer graphics and computer-based imaging systems are widely used locally and abroad. Activities in schools are enhanced by a variety of computer-aided instructional systems, many of which have been developed for export. While some of Israel’s software products are designed for use on mainframe computers, most have been developed for small or medium-sized systems such as computer workstations. A computer mouse with three touch-pads, allowing the visually impaired to “read” text and graphics on screen, was developed in Israel.

Robotics, first researched in the late 1970s, is now producing robots designed to perform a wide variety of tasks, including diamond polishing, welding, packing, building, and more. Research is now under way in the application of artificial intelligence to robots.