Iran war fears hitting Israeli suppliers

Businesses tell "Globes" that overseas customers are demanding guarantees over continued production in the event of war.

The talk about a possible Israel strike on Iran's nuclear facilities is hitting Israel's business sector. RH Technologies Ltd. (TASE: RHTCH) chairman Jacob Rosenberg says that he has to explain to his foreign customers whether he will meet future supply contracts in the event of a war. RH Technologies manufactures components and printed circuit boards for multinational electronics companies at its plant in Upper Nazareth.

Rosenberg told "Globes", "The lively security debate over whether Israel will attack Iran is causing us immense damage and uncertainty. Many US companies which are our customers are signaling pressure and panic and demanding answers from us, such as how they will receive components from us if Israel's home front is bombarded by hundreds of rockets and missiles a day."

Rosenberg says that his big customers have lately been demanding guarantees that RH will meet deliveries in the event of a war. In response to pressure from his customers, he has accelerated plans to set up foreign production infrastructure to handle a scenario of a war lasting several weeks and involving missile attacks on the home front that disrupts production. < p> "We are currently investing half a million dollars in setting up infrastructure in Hungary, which will continue production for our foreign customers if Israel is attacked by missiles and economic output is disrupted. Under such conditions, I will move critical production employees, 100-150 technicians and engineers, to Hungary, where they will be able to lead operations and ensure that they are run smoothly. In the meantime, we are exploiting the routine to produce more components to increase inventory to ensure regular deliveries in the event that production is stopped with warning," says Rosenberg.

Rosenberg slams what he calls the "irresponsible debate". "I have never seen such a situation in which war is managed in the media. All this debate about whether to attack or not to attack Iran causes immense damage. Everyone is sitting on the fence, not prepared to make decisions about investments or new contracts. The great risk is what will happen to companies that will have to move their production overseas during the fighting. There is no certainty that they will bring the production back to Israel, because they will discover that foreign tax systems and the proximity to markets is much more attractive, and they will prefer to stay there," he says.

Escrow Europe (Israel) Ltd. managing director Adv. Ronen Slutzky, whose company specializes in source codes for software, databases and industrial designs for private software houses also speaks about such a trend among companies dealing with Israeli high tech.

According to him, in recent months, there has been a significant increase in the number of companies worldwide that demand access to sensitive codes if there is a war or powerful economic crisis that may cause Israeli suppliers to cease to exist.

Source codes are considered the basic language of electronic components and are not given to customers to ensure that these items can be utilized if the manufacturer closes down or their databases disappear. These customers worldwide are demanding that the codes be deposited with trustees.

A senior source in the Ministry of Industry, Trade and Labor said they these were isolated instances and are not a broad scale occurrence. The Ministry's Foreign Trade Administration conducted a survey which found that there has not been a wave of requests from companies worldwide for guarantees from Israeli manufacturers.

Published by Globes [online], Israel business news - www.globes-online.com - on August 20, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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