Market Trends of Saudi Arabia Defense Industry
Saudi Arabia Strengthening its Defense Capabilities Amid Tensions in the Middle East
Over the past few decades, the Middle East became a global hotspot for conflicts, with civil wars raging in Syria, Iraq, Yemen, and Libya. Moreover, the internationalization of civil wars led to coalitions between countries, which further disturbed the geopolitical climate in the region.
In addition, the Iran-Saudi Arabia proxy conflict, an ongoing struggle for influence in the Middle East and surrounding regions between Iran and Saudi Arabia, led the countries to provide varying degrees of support to opposing sides in nearby conflicts. With several nations indulging in armed conflicts in the region, there is a growing push among the countries to obtain military assets comparable in roles and capabilities to the adversaries. Moreover, the indulgence of global superpowers with advanced military capabilities, like the United States and Russia, into the scenario further boosted these requirements.
The country is consistently investing in acquiring state-of-the-art weaponry, upgrading infrastructure, and promoting innovation through research and development initiatives to strengthen national defense capabilities. In 2022, Saudi Arabia is ranked as the fifth-largest defense spender in the world, with a defense budget of USD 75 billion. As per the 2023 budget released by the Saudi Arabia Ministry of Finance in December 2022, the Kingdom will spend USD 69 billion on defense in 2023. It is approximately 23% of its total budget, which increased by 50% from the 2021 defense budget.
Sea-based Vehicles Segment is Expected to Register Significant Growth During the Forecast Period
The regional security environment increasingly emphasizes the importance of naval power. Navies play a front-line role in securing sea lines of communication to ensure freedom of navigation at sea and protect exclusive economic zones and offshore assets. The navy also plays a crucial role in providing warning and engagement capabilities against air and missile attacks. Intensifying international competition in the Red Sea on its western flank, Yemen's implosion, and the Horn of Africa's instability are significant trends redefining Riyadh's maritime threat landscape beyond the Arabian Gulf.
The government of Saudi Arabia initiated the Saudi Naval Expansion Program II, a naval modernization program spanning more than 10 years. The government plans to spend approximately USD 20 billion on new ships (which may replace the outdated East Naval Fleet) and about USD 6 billion on the frigate program built by Lockheed Martin. SNEP II focuses attention on the Royal Saudi Navy's Eastern Fleet, which last underwent a major modernization program in the 1980s and 1990s. It is largely driven by a need to counter Iranian naval power. It focuses on the ability to blockade critical maritime chokepoints, such as the Strait of Hormuz.
For instance, in February 2024, Indra Sistemas SA signed a contract with Lockheed Martin Corporation to equip the four Multim Mission Surface Combat ships (MMSCs). It will be delivered to the Royal Saudi Arabian Navy with an electronic defense system. Back in July 2018, Lockheed Martin Corporation was awarded a contract worth USD 450 million to begin the detailed design and planning for the construction of four Multi-Mission Surface Combatants (MMSC). The vessels are being procured as part of a modernization program for the RSN’s eastern fleet called SNEP II (Saudi Naval Expansion Program).
Similarly, in February 2023, MBDA won the contract to supply CAMM(Common Anti-Air Modular Missile) to the Royal Saudi Navy’s MMSC. Such robust procurements in the naval segment are anticipated to accelerate the market's growth during the forecast period.
