Cuts in Software, Expansion in Hardware: The New Picture of the High-Tech Job Market

A survey by the Innovation Authority and Tzabiran among 210 companies employing about 130,000 workers reveals a complex picture: employment in high-tech is stable at the macro level, but beneath the surface a structural split is occurring. Software companies are undergoing a wave of layoffs (6.6%) due to the expanding use of AI, while hardware, chip, and deep-tech companies are expanding and hiring at a rapid pace (layoffs of only 1.1%). The survey points to gaps by company size and ownership type, and a cautious forecast for the rest of the year with an expected decline in hiring.

A comprehensive survey by the Innovation Authority and Tzabiran, conducted in the second half of June 2026 among 210 companies employing about 130,000 workers, paints a complex picture of the Israeli high-tech job market. At the macro level, employment is stable: in the first half of the year, companies hired workers at an average rate of 8% of their workforce, while the layoff rate stood at only 2.8%, and the voluntary attrition rate at 4.3%. However, beneath the surface, a historic trend reversal is occurring: software companies are undergoing a wave of efficiency measures and cutbacks due to the expanding use of AI, with a layoff rate of 6.6% - more than twice the industry average. In contrast, hardware, chip, and deep-tech companies continue to expand, with a minimal layoff rate of 1.1%, due to global demand for computing infrastructure. Gaps are also evident by company size: mid-sized companies (50-200 employees) recorded a high layoff rate of 8.7%, and the exchange rate was cited as a direct factor by 17.6% of companies that conducted broad layoffs. The forecast for the rest of the year is cautious: more than a third of companies expect a decline in hiring, and the planned hiring rate dropped from 7.2% to 5.9%. Artificial intelligence is the main driver of change: the share of companies reporting widespread AI integration in their products rose from 21% to 30%, and the share of companies that reduced hiring due to AI tripled to about 10%. Dror Bin, CEO of the Innovation Authority, emphasizes that this is a structural change, not a retreat: the market is not shrinking, but the composition of demand is changing, and workers are required to adapt to new skills in hardware and deep-tech fields.