Headquartered for seven years in Silicon Valley, unquestionably the capital of the high-tech world, the West Coast Israeli Consulate for Economic Affairs closed shop Tuesday and is moving to Los Angeles — unquestionably not the capital of the high-tech world.

The move, described as a cost-cutting maneuver by outgoing Economic Consul Yishai Laks, has some Israeli Silicon Valley executives scratching their heads.

"We are closing the office down because we are doing some rethinking about our present coverage of the U.S. And due to some budgetary cuts, we had to recalculate where we can put a full-time consul," said Laks, who is returning to Israel to hold an undetermined government office following his four-year term in Santa Clara.

"The minister decided that, because I'm finishing here, and due to the cost of being in the Silicon Valley — which is relatively higher than other parts of the United States — we had to consider posting the next consul in Los Angeles."

A move to Southern California could benefit Israeli entrepreneurs in non-high-tech fields, such as real estate, commercial manufacturing and the entertainment business, said Laks. Additionally, with a strong Israeli presence already solidified in the Silicon Valley, "the presence of a consul may be more needed in Southern California."

Hagi Schwartz, the chief financial officer of the Silicon Valley firm Atrica Inc., is puzzled by the consulate's move. Before the move to Santa Clara, the economic consulate had served the Bay Area from San Francisco.

"If the decision is based on trying to save some money, then I don't think this is a serious discussion. What do they spend, salary? They still have to pay the same salary to the guy in L.A. If they're trying to save money on office space, right now prices are coming down in such a big way, the savings, if there are any, will be so insignificant," said Schwartz, an Israeli who runs an optical networking company.

"Israel is blessed with good talent; forget about the downturn in the economy right now. It's all about cycles. What happens four years from now? Who will be here to open doors and help Israeli companies to penetrate the U.S. market? Not the guy in L.A. He won't be able to do it."

Schwartz was also confused as to why Israel's new economic consul, Doron Abrahami, will be posted in Los Angeles. The majority of Israeli entrepreneurs settle in either the Boston area or Silicon Valley, with a few startups popping up in San Diego, claimed Schwartz.

Along with the L.A. office, New York, Boston, Chicago and Washington also house Israeli economic consulates. An office may be opened in Houston next year.

Laks stressed that the Israeli government wasn't abandoning Silicon Valley or the high-tech industry, as Abrahami would continue to work with Silicon Valley companies.

Meanwhile, Arnon Gat, the CEO of Silicon Valley's Guide Technology, thinks the switch to Los Angeles looks like the right move.

"This means that there's probably more opportunity for L.A. companies to relocate or expand in Israel than the high-tech high-fliers in Silicon Valley. And it's probably the right direction," said Gat, an Israeli whose company produces test equipment for high-end semiconductor chips. "Things may change in the next few years, and I'm glad the government of Israel is flexible enough to go with the times."

Gat, who worked with the Israeli economic consulate seven years ago to set up a subsidiary of his previous company in Israel, said the time may be right for the economic consulate to duck out of Silicon Valley until the economy begins to roll once again.

With the closure, "there may be less presence and less positive pressure on companies that may be candidates for moving into Israel," he said. "But especially in the [economic] climate today, I don't see too much expansion to begin with. People are not concerned with expanding their R and D [research and development] base or their manufacturing base; they're concerned about survival. Putting a plant in Israel is really a third or fourth priority."