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Saudi Arabia C4ISR Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Saudi Arabia C4ISR Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

  • March 2022
  • 93 pages
  • ID: 6249230
  • Format: PDF
  • Mordor Intelligence LLP

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The Saudi Arabia C4ISR market was valued at USD 760.75 million in 2021 and is estimated to register a CAGR of 1.27% during the forecast period (2022 - 2027).

Over the past decade, Saudi Arabia consistently ranked near the top of global rankings for the total amount of defense spending and the amount spent on importing armaments. However, even before the outbreak of the COVID-19 pandemic, Saudi Arabia began reducing its defense expenditures. This can be attributed to various factors like the decrease in oil revenues and the increased focus of the government toward non-military sectors, such as healthcare and social development. The country is expected to further reduce its defense expenditure in the years to come. Saudi Arabia plans to spend 171 billion riyals (USD 46 billion) on its military in 2022, about a 10% decrease from the 2021 defense budget of 190 billion riyals (USD 51 billion), according to the official budget statement. The reduction in defense spending is expected to challenge the growth of the C4ISR market during the forecast period.

Nevertheless, the defense spending of the country is one of the highest in the world, which enables the country to focus on its objective of military capability modernization. The factors like growing threats from adversaries and increasing territorial tensions and growing risk from asymmetric warfare in the region are propelling the military to enhance its battlefield data-sharing capabilities.

There is a growing emphasis on increasing the investments towards the integration of advanced technologies like machine learning and artificial intelligence into C4ISR solutions to enhance the efficiency and situational awareness of the military personnel. Saudi Arabia made Data and Artificial Intelligence as key focal points of its Saudi Vision 2030, which is expected to propel the market growth in the coming years.

Key Market Trends

Saudi Vision 2030 is Expected to Drive the Market Growth

Despite the huge defense spending, Saudi Arabia has lagged in developing its local defense industry over the years. Between 2013 and 2017, 90% of Saudi Arabia’s military expenditure went to foreign companies. To address such outflows of military expenditure, as part of the Saudi Vision 2030 program the government aims to bolster the infrastructure and capabilities of the local defense industry, increasing its local purchases of military equipment to 50%. As part of Vision 2030, in February 2021, Saudi Arabia announced its plan to invest more than USD 20 billion in its domestic military industry over the decade as part of aggressive plans to boost the local defense industry. The country also plans to increase its military R&D spending from 0.2% to around 4% of its expenditure by 2030. The Saudi government facilitated the formation of the General Authority of Military Industries (GAMI) and Saudi Arabian Military Industries (SAMI) to develop the national military manufacturing capabilities. In 2021, SAMI completed the acquisition of Advanced Electronics Company (AEC) as part of the largest military industry deal in Saudi Arabia, making AEC a 100% Saudi-owned company. Advanced Electronics Company (AEC) has developed several new electronic warfares, C4ISR, electronics, and cybersecurity solutions in the last few years. It is currently aiming at increasing its defense capabilities over the next decade as part of the Saudi Vision 2030 program. Being a state-owned local defense contractor, SAMI is expected to hold a significant share in the country’s C4ISR market during the forecast period. Besides, local defense contractors are increasing efforts to establish joint ventures with foreign defense companies like Lockheed Martin Corporation, Raytheon Technologies Corporation and L3 Harris Technologies Inc. for the design, assembly, manufacture, and maintenance of military equipment. While this might help global players enter and strengthen their presence in the Saudi market in the short term, the partnerships will facilitate technology transfer and help the local players develop capabilities in the long term. On the other hand, the Saudi Data & AI Authority’s National Strategy for Data and Artificial Intelligence aims to make the country a global AI leader by 2030. This is expected to drive the integration of such emerging technologies into C4ISR systems in the country in the years to come.

Naval Modernisation Initiatives to Propel the Revenues of the Sea Segment

Over the years, Saudi Arabia started to focus on upgrading its relatively small and outdated naval arm. The country is currently working on a huge armed forces modernization project with a particular focus on the Royal Saudi Naval Forces (RSNF), which used to receive less attention as compared to the Air Force or Army. The program, called the Saudi Naval Expansion Programme (SNEP II) particularly focuses on modernizing the outdated East Naval fleet. The RSNF is procuring naval vessels, fixed-wing aircraft, helicopters, and UAVs, which will be equipped with advanced data sharing and situational awareness capabilities, as part of the program. The procurement of such platforms is expected to generate significant demand for related C4ISR systems in the coming future. On the other hand, the country has allocated USD 18 billion for the Royal Saudi Navy’s extensive planned C4I command and control and intelligence-sharing network. This project includes large-scale upgrades to facilities, hardware, and software that support naval forces, including the country’s small marine and naval special warfare contingents. Furthermore, the procurement of new naval vessels is expected to increase the demand for sea-based C4ISR systems. In December 2021, Navantia launched the fifth and the final corvette being built for the Royal Saudi Naval Forces (RSNF), named ‘Unayzah’. The work on the corvette is expected to be completed by the end of 2023. The design of the corvettes is of the latest generation, maximizing the participation of Navantia by incorporating its own products, such as the CATIZ Combat System, the HERMESYS Integrated Communications System, the DORNA Firing Direction, the Integrated Platform Control System, and the MINERVA Integrated Bridge. The corvette is designed to conduct anti-surface warfare (ASuW), electronic warfare, maritime protection, intelligence gathering, search and rescue (SAR), humanitarian aid and marine pollution control, as well as combating smuggling, drug trafficking, and illegal immigration. Such procurements are expected to drive the growth of the Sea segment during the forecast period.

Competitive Landscape

Some of the prominent players in the Saudi Arabia C4ISR market are Saudi Arabian Military Industries, General Dynamics IS&T Arabia (General Dynamics Corporation), Lockheed Martin Corporation, Raytheon Technologies Corporation, and L3Harris Technologies Inc. With the growing focus on the localization of the defense industry, the country is expected to invest in the capability enhancement of the local players. This is expected to boost the growth of the local player, Saudi Arabian Military Industries (SAMI). SAMI has enhanced its presence in the C4ISR market by acquiring Advanced Electronics Company in 2021, which is the largest military industry deal ever concluded in Saudi Arabia. On the other hand, foreign players are formulating new strategies to expand their presence in the country and capture new contracts from the armed forces. These players in the market are actively participating in forming JVs and partnerships with the local manufacturers to expand their presence in the country. In addition to such plans, investments into R&D for the development of C4ISR systems integrated with technologies like AI and quantum networking are also anticipated to help the companies increase their market share during the forecast period.

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