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Saudi Arabian Military Industries (SAMI): Fueling the Growth of Saudi Defense Industry

Defense industries in the Gulf are evolving fast, but while the case of the United Arab Emirates has received much attention, the rapid growth of the Saudi Arabian Military Industries (SAMI), a wholly-owned subsidiary of the Public Investment Fund (PIF), is not so well-known. Established in 2017 to reduce the country’s reliance on foreign purchases of defense products, SAMI has quickly become the major player in the Kingdom’s defense industry. Through a combination of external and internal moves, SAMI is aiming to become an original equipment manufacturer and be among the top 25 largest defense companies in the world by 2030.

A Growing Capability

Only six years after its establishment, SAMI claims to have a backlog of over $10 billion in contracts, and its CEO announced reaching a localization percentage of close to 15%. In 2020, SAMI’s annual revenue was a mere $20 million, which then increased to $690 million in 2021. A few months later, in March 2022, SAMI captured more than half of the $2.9 billion in contracts awarded to local companies during the World Defense Show held in Riyadh. At the show, the Kingdom signed 22 localization agreements, and the Ministry of Investment inked 12 memoranda of understanding with defense companies, showcasing Riyadh’s willingness to become a major player in the global defense industry. SAMI’s rapid growth has also led to a significant increase in employment, with the company now boasting over 3,600 employees and planning to add 1,500 in the next quarter compared to just 100 in 2018.

This growth has been fueled by a series of external and internal moves. In an interview with the author, an employee at the Kingdom’s defense sector explained that the company hopes to activate around 18 joint ventures with global defense giants to help it accelerate technology transfers. Such partnerships are essential, as they allow SAMI to leverage the experience, expertise, and technology of international defense companies, which can help build its capabilities and reduce its reliance on foreign purchases of defense products. For instance, SAMI can now claim it produces the HAZEM naval combat management system, developed through transfers of technology from Navantia, a Spanish state-owned shipbuilding company.

As of November 2022, 12 joint ventures were officially active, including with Navantia, L3Harris, Thales, Figeac Aero, and John Cockerill, while others were being negotiated. As of early 2023, SAMI planned to activate new joint ventures with Airbus, Boeing, MBDA, Lockheed Martin, and possibly South Korea’s Hanwha. The JV with Boeing will focus on providing rotorcraft technical support, while the 2022 partnership with Singaporean ST Engineering is already operational, and both are exploring cooperation in autonomous capabilities. Meanwhile, the facility developed jointly in Riyadh by SAMI Composites and Lockheed Martin, which will boost the Kingdom’s aerospace manufacturing capabilities, will be operational by the end of 2023.

Expanding Locally: SAMI’s Acquisition and Construction Initiatives

Internally, SAMI’s rapid growth has been supported by the acquisition of existing local defense companies, some of which have existed for several decades, with three recent examples. In July 2019, SAMI announced the acquisition of Aircraft Accessories & Components Company, a large maintenance, repair, and overhaul service provider in the Middle East. A year later, SAMI purchased Advanced Electronics Company, which now forms the backbone of SAMI’s defense electronics division, in what was the largest military industries deal ever concluded in the Kingdom. In August 2022, SAMI was cleared to acquire 51% of Saudi Rotorcraft Support Co., which specializes in aircraft repairs.

Similarly, SAMI is boosting its growth by building and/or acquiring its own factories and facilities, such as the land systems facility being built in Al Kharj, which will be operational by early 2026, to build and upgrade hundreds of light military vehicles. It is also building an ammunition industrial complex, as well as an aerospace hub at Malham, focusing on fixed wing aircraft, rotorcraft, and UAVs, which could be operational by 2024. SAMI is also building a factory that will manufacture composites of aeronautical material, and will manage the facilities of Tatra, a Czech truck maker, to build military trucks.

In the naval domain, the Saudi defense conglomerate signed an agreement with International Maritime Industries, the entity managing the massive King Salman Shipyard project, to localize the constructions of vessels for the Royal Saudi Naval Forces. Rather than radically improving Saudi Arabia’s military capabilities, a successful localization effort will probably give the Kingdom additional strategic autonomy to pursue its own foreign policy goals without worrying too much about external pressures.

Challenges and Future of Local Defense Ventures

While SAMI made significant strides through strategic partnerships, acquisitions, and construction initiatives, challenges in staffing and local manufacturing costs persist, even as it expands and potentially influences future defense procurement decisions. In addition to facing competition from EDGE, a burgeoning defense conglomerate based in the UAE, SAMI is struggling to find enough technicians to staff its projects. This is why an academy to train Saudi military technicians was recently established, in cooperation with leading defense companies.

Another challenge is of a financial nature. Locally manufactured products tend to be more expensive than those procured from foreign suppliers, due to the need to invest in R&D and the necessary facilities to scale up production. In other words, the procuring entities (the armed forces, the ministry of interior, and others) must be willing to pay a premium for equipment made in Saudi Arabia; otherwise, local defense manufacturers would be unable to compete with foreign competitors, at least in the earlier stages. Reflecting this, the governor of GAMI, an entity that regulates Saudi Arabia’s defense industry, said that the Kingdom had spent $1.4 billion in incentives to boost its local military sector in 2021 and 2022.

As SAMI continues to expand, it will likely play an increasingly influential role in future defense procurement decisions. Areas of focus for SAMI in the coming years will be unmanned systems, radars, and cybersecurity. Companies seeking to export defense equipment to Saudi Arabia will likely have to work with SAMI and prioritize technology transfers through joint ventures or other means, and could be sidelined if they refuse to do so. American companies are not alone in dealing with SAMI; other competitors from Spain, France, Belgium, and South Korea have also established close partnerships with the Saudi defense conglomerate. The implications of SAMI’s rise are significant for both the Saudi defense industry and for international defense companies seeking to do business in the Kingdom.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.

Issue: Defense & Security
Country: KSA

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Albert Vidal Ribe is a Research Analyst for Defence and Military Analysis at the International Institute for Strategic Studies. Prior to joining the IISS in September 2023, Albert was a Research Associate at the Gulf International Forum in Washington DC. He has published in the Arab Gulf States Institute, the Gulf International Forum, the Gulf States Newsletter, and the Center for Maritime Strategy, among others. Albert earned an MA in Arab Studies at Georgetown University as a  Fulbright Scholar. He was selected as Spain’s best International Relations graduate in 2021 by the Spanish Society of Academic Excellence. He was also selected by the Nova 111 Student List, which brings together the top 111 Spanish talents under 25.


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