Israel invests in quantum, photonics hardware capacity

Israel is accelerating efforts to build domestic capacity in quantum and photonics hardware, combining public funding with private-sector coordination to address gaps in fabrication, testing, and manufacturing support. The moves reflect broader concerns about supply chain sovereignty as global technology blocs increasingly restrict access to critical components and infrastructure.

The Israel Innovation Authority and the Ministry of Defense’s Directorate of Defense Research & Development (DDR&D) have opened a NIS 150 million call for proposals to establish or operate advanced integrated photonics R&D infrastructure. Separately, Qubit IL, Israel’s quantum technology association, and the GUTS-Harel Innovation Hub launched the country’s first Quantum Launchpad, an ecosystem program designed to connect startups, investors, government agencies, and academic institutions.

Public funding meets private coordination

The photonics infrastructure initiative targets a longstanding weakness in Israel’s technology sector: while the country excels in software, cybersecurity, and defense electronics, hardware development has lagged due to high capital requirements and limited access to specialized facilities. The selected infrastructure is expected to support design, prototyping, testing, packaging, and transition to volume manufacturing, with partial R&D services required within 12 months of approval. Funding will cover 55-66% of approved costs over three years, after which the facility must operate as a for-profit R&D services company.

The Quantum Launchpad, meanwhile, addresses a different challenge: the need for coordination among quantum startups, which require access to physicists, engineers, patient capital, and early customers. Tami Mazel Shachar, CEO of Qubit IL, described the initiative as a signal that Israel is positioning itself to compete in a global quantum market projected to reach $850 billion by 2040. The launch event drew 80 participants, including CEOs, investors, government representatives, and five new startups entering the quantum space.

Strategic and commercial pressures

The photonics initiative is explicitly dual-use, with the Ministry of Defense’s involvement signaling interest in applications like secure communications, sensing, and advanced computing. For commercial markets, the immediate relevance lies in data centers, where optical technologies are increasingly necessary to overcome power and bandwidth limitations in high-density AI and cloud infrastructure. The funding call emphasizes shared industrial capacity, aiming to avoid the inefficiencies of startups building redundant facilities.

However, shared infrastructure introduces governance challenges. The call requires applicants to address service availability, intellectual property protections, and equitable access for academic and industrial users. Execution risks include potential conflicts over capacity allocation, particularly if larger customers dominate usage or if startups face delays in meeting funding milestones or customer demonstrations.

For investors, the initiatives could reduce the capital required to validate hardware startups, accelerating iteration and technical validation. Yet skepticism remains about whether the infrastructure will be sufficiently accessible or whether quantum market projections—such as the $5 billion in private capital expected in 2025—will materialize. Israel’s quantum sector has grown from five to 25 companies, with nine startups raising over $800 million, half of that in the past year.

What to watch

The success of these programs will depend on three factors: the speed and quality of infrastructure deployment, the ability to balance commercial and defense priorities, and the ecosystem’s capacity to retain talent amid global competition. If executed effectively, the initiatives could position Israel as a hub for photonics and quantum hardware, reducing reliance on foreign supply chains. If delays or governance issues arise, startups may continue to face barriers to scaling, particularly in a market where hardware development cycles are longer and more capital-intensive than in software.