500 days of unstoppable innovation: How Israel's defense industries defied the odds 

On October 7, it seemed that no less than the IDF, Israel's defense industries had also suffered a severe blow. Israeli industries did not have the political and economic backing that the United States or France knows how to give to their defense industries.

The industries felt the war firsthand: Elbit was forced to close its factory in Kiryat Shmona with the evacuation of the city, and quite a few of Rafael's employees, which is concentrated in the northern region, were evacuated from their homes. The company's operators in the north became targets for Hezbollah rockets, and the Palsan defense plant in Kibbutz Sasa was hit by anti-tank missiles launched by the organization.

In the weeks that followed, the dilemma of the industries in Israel only intensified. The great advantage of the industries has always been a direct connection to the IDF, with many of their engineers and manufacturing personnel serving in the reserves in the units that operate the equipment they produce, and returning from the field with complaints and suggestions for improvements. But during the war, it became another problem: The Ministry of Defense sent urgent orders for equipment, while the industries were dealing with the recruitment of about 10-20% of their workers.

And if that wasn't enough, the following months the defense industries encountered increasing difficulty in purchasing components and raw materials. As a measure of political pressure, countries such as Britain, Canada, and others began to officially and less formally delay the processing of export permits for sensitive products that were required by industries in Israel.

Almost a year and a half later, the Israeli defense industries are in a completely different place. Much like the IDF, they overcame the initial difficulties, and later excelled, coping well with the challenges they faced. It is not for nothing that US President Donald Trump announced that the United States would establish its own "Iron Dome", a multi-layered air defense system to intercept everything from drones to ballistic missiles. The fact that the American president used the name of the system, whose reputation only grew stronger in the wake of the war, shows the positioning of the Israeli industry.

Initially, the Israeli companies recruited more than 1,000 retirees, and began employing some of the workers who were not recruited seven days a week, moving to a warlike production rate. Later, they began an orderly recruitment, and since then they have hired about 5,000 new employees, mainly for production and logistics, but also for engineering and development. The economic crisis that hit other industries helped them recruit, as did the cooling of the high-tech industry, which helped them bring back software people who had left them a year or two earlier during the boom of the local high-tech industry.

With the backing of the Ministry of Defense, and with the understanding of the customers, in some cases the local industries succeeded in reaching an agreement with foreign countries on the postponement of supplies, in order to divert production to the IDF.

And most importantly, the war really didn't hurt the companies' business results, which have since recorded record revenues, profits and orders. IAI and Elbit's order backlog, for example, jumped from $16.6 billion each in September 2023 to $22 billion at Elbit at the end of the third quarter of this year, and $25 billion for IAI. Rafael's backlog of orders, which reports in shekels, jumped from NIS 43 billion to NIS 60 billion within a year.

Most of the increase came from huge orders from the Ministry of Defense, based on war budgets and special American aid. The ministry has placed billions of dollars in orders for the purchase of new stockpiles of armaments, mainly Iron Dome and Arrow interceptors. But the companies also reported new orders classified in the billions, for weapons and intelligence systems for which the war freed up funding and proved the need for them.

The share of exports recorded a smaller increase. But even countries that led a strong anti-Israeli line in the war sent their procurement personnel with checkbooks to Israel to close urgent gaps in their capabilities. The Netherlands, for example, has since purchased Rafael anti-tank missiles and aircraft defense systems from Elbit, after restricting the sale of F-35 components to Israel. Spain, another harsh critic of Israel, ordered hundreds of millions of euros from Elbit rocket launchers.

And all this happened because at the moment of truth, the weapons systems developed in Israel proved themselves, in Gaza, Lebanon, Yemen and Iran. The windbreaker system did not completely prevent damage to the crews of the Merkava tanks and the armored personnel carriers, but it did manage hundreds of them from direct hits. The laser-guided and GPS-guided mortar shells, the "steel sting" in the IDF, have proven to be more accurate and, above all, better available than combat helicopters and drones to forces on the ground.

Almost 40 years after it was launched as a theoretical study as part of President Reagan's "Star Wars" program, IAI's Arrow system has successfully dealt with a barrage of ballistic missiles from Iran twice, alongside Rafael's David's Sling and Iron Dome systems. The Arrow recorded its first operational interceptions in space, even if it recorded a number of misses later on in intercepting missiles from Yemen and did not intercept 100% of the Iranian missiles. Even Rafael's air-to-air missiles were used for the first time in years to intercept UAV waves.

MSN contributed to this article.