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Future of the Saudi Arabia Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022

Future of the Saudi Arabia Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022

Summary

Saudi Arabia is one of the largest defense spenders in the world, behind the US, China, and Russia, with a military budget valued at US$50.9 Billion in 2017. The country is the largest market in the Middle East due to its robust economic and financial position backed by its oil exports. The rising tension with Iran, aggressive procurement strategies, and modernization programs, along with the need to strengthen its indigenous defense industry, are the main factors boosting the country’s military expenditure. Saudi Arabian defense expenditure is expected to increase from a projected US$60.5 Billion in 2018 to reach US$80.8 Billion by 2022 at a CAGR of 7.54%.

Saudi Arabia is making rapid strides in the military sector by becoming the fifth largest defense spender in the world. In 2015, the country briefly managed to displace Russia and emerge as the third largest defense spender, next only to that of the US and China. Saudi Arabia plans to source as much as 50% of its defense equipment from domestic defense companies in future and in May 2017, the Saudi Arabian Public Investment Fund (PIF), decided to create a national defense industry company - Saudi Arabian Military Industries (SAMI).

The country’s capital expenditure increased from US$20.4 Billion in 2013 to US$22.4 Billion in 2017, at a CAGR of 2.35%, attributed primarily to the drastic decline in global oil & gas prices worldwide. With Saudi Arabia deriving as much as 86% of its revenues from the export of Brent crude shipments, the continued low oil prices have impacted revenue inflows and caused the country’s economy to contract for two consecutive years in 2015 and 2016.

Homeland security is an area that has gained prominence in Saudi Arabia over the last decade, with expenditure expected to increase from US$25.8 Billion in 2017 to US$33.3 Billion in 2022 at a CAGR of 5.26%. With the revolution of Arab Spring in the Middle Eastern and the North African (MENA) region and minor protests in Riyadh, the country is expected witness growing expenditure to enhance security measures.

The US was the leading supplier of arms to Saudi Arabia, occupying a share of 46% with major contracts including the modernization of the Saudi M1A2 Tank fleet and E-3 AWACS, and supply of UH-60 helicopters among others. However, to enhance its domestic defense capabilities, the government introduced an Economic Offset Program, a tool to encourage foreign companies to establish joint ventures (JVs) with Saudi Arabia’s domestic organizations.

The report “Future of the Saudi Arabia Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022” offers detailed analysis of the Saudi Arabian defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.

In particular, it provides an in-depth analysis of the following -
- The Saudi Arabian defense industry market size and drivers: Detailed analysis of the Saudi Arabian defense industry during 2017-2021, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s expenditure and modernization patterns.
- Budget allocation and key challenges: Insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to the army, navy, and air force. It also details the key challenges faced by defense market participants within the country.
- Porter’s Five Force analysis of the Saudi Arabian defense industry: Analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry.
- Import and Export Dynamics: Analysis of prevalent trends in the country’s imports and exports over the last five years.
- Market opportunities: Details of the top five defense investment opportunities over the next 10 years.
- Competitive landscape and strategic insights: Analysis of the competitive landscape of the Saudi Arabian defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.

Companies mentioned in this report: BAE Systems Plc. , Airbus Group, General Dynamics Corporation, Lockheed Martin, Science Applications International Corporation (SAIC), Sikorsky Aircraft Corporation, Thales SA, Boeing, Northrop Grumman Corporation, Advanced Electronics Company (AEC) and Al Salam Aircraft Company.

Scope

- Saudi Arabia is one of the largest defense spenders in the world, behind the US, China, and Russia, with a military budget valued at US$50.9 billion in 2017. The country is the largest market in the Middle East due to its robust economic and financial position backed by its oil exports. The rising tension with Iran, aggressive procurement strategies, and modernization programs, along with the need to strengthen its indigenous defense industry, are the main factors boosting the country’s military expenditure.
- On a cumulative basis, the country is expected to invest US$352.9 billion for defense purposes, of which US$159.8 billion is earmarked for capital expenditure to fund defense procurements. The government’s well-defined military modernization plans along with its efforts to supress Houthi insurgency in Yemen as well as its support for rebel factions within Syria, are expected to stimulate the expenditure over the next few years
- The MoD is expected to invest in fighters and multirole aircraft, infrastructure construction and facilities management.

Reasons to buy

- This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Saudi Arabian defense industry market trends for the coming five years
- The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period
- Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. - This will provide the user with a total competitive landscape of the sector
- A deep qualitative analysis of the Saudi Arabian defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts


1. Introduction
1.1. What is this Report About?
1.2. Definitions
1.3. Summary Methodology
1.4. About Strategic Defence Intelligence
2. Executive Summary
3. Market Attractiveness and Emerging Opportunities
3.1. Current Market Scenario
3.1.1. Primary Threat Perception
3.1.2. Military Doctrine & Strategy
3.1.3. Military Fleet Size
3.1.4. Procurement Programs
3.1.5. Ongoing procurement programs
3.1.6. Future procurement programs
3.1.7. Social, Political and Economic Environment & Support for Defense Projects
3.1.8. Political & Strategic Alliances
3.2. Defense Market Size Historical and Forecast
3.2.1. Saudi Arabian defense budget to grow at an estimated CAGR of 7.54% during 2018-2022
3.2.2. Strained relationship with Iran, military modernization programs, and the need to develop its indigenous defense sector to be key factors driving defense expenditure
3.2.3. Saudi Arabian defense expenditure as a percentage of GDP is expected to average 8.9% during the forecast period
3.3. Analysis of Defense Budget Allocation
3.3.1. Majority of the budget to be allocated for revenue expenditure
3.3.2. Capital expenditure is anticipated to record a CAGR of 8.29% during the forecast period
3.3.3. Per capita defense expenditure expected to increase over the forecast period
3.4. Homeland Security Market Size and Forecast
3.4.1. The homeland security market in Saudi Arabia is expected to grow at a CAGR of 5.26% during the forecast period
3.4.2. Border Security and Infrastructure along with cyber security will be the key factors driving homeland security
3.4.3. Saudi Arabia considered at ‘moderate risk’ of terrorist attack
3.4.4. Saudi Arabia faces high level of threat from foreign terrorist organizations
3.4.5. Saudi Arabia has a terrorism index score of 5.4
3.5. Benchmarking with Key Global Markets
3.5.1. Saudi Arabia fifth largest defense spender
3.5.2. Saudi Arabia is expected to remain among the top five defense spending countries in the world
3.5.3. Saudi Arabia spent over 7.2% of its GDP on defense in 2017
3.6. Market Opportunities: Key Trends and Drivers
3.6.1. Fighters & Multi-Role Aircraft
3.6.2. Infrastructure Construction
3.6.3. Facilities Management
4. Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Defense industry heavily relies on imports from foreign countries
4.1.2. The UK and the US are the key defense suppliers to Saudi Arabia
4.1.3. Aircraft to dominate Saudi Arabian defense imports
4.2. Export Market Dynamics
4.2.1. Saudi Arabia’s defense export market is negligible
5. Industry Dynamics
5.1. Five Forces Analysis
5.2. Bargaining power of supplier: Low to Medium
5.3. Bargaining power of buyer: Medium
5.4. Barrier to entry: Medium
5.5. Intensity of rivalry: High to Low
5.6. Threat of substitution: High
6. Market Entry Strategy
6.1. Market Regulation
6.2. Defense industry remains closed to FDI
6.3. Offset Program to aid defense industry and economy
6.4. Market Entry Route
6.4.1. Budgeting Process
6.4.2. Procurement Policy and Process
6.4.3. A large number of foreign corporations enter the defense market by winning contracts
6.4.4. Collaborations and cooperative agreements provide market entry opportunities
6.4.5. GCC - an entry route to Saudi Arabian military market
6.5. Key Challenges
6.5.1. Bribery, corruption, and political affiliations
6.5.2. Scarcity of skilled Labor and Nitaqat law
7. Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.1.1. Saudi Arabian defense sector is dominated by foreign competitors
7.1.2. Domestic participation in the Saudi Arabian defense industry is limited to few companies
7.2. Key Foreign Companies
7.2.1. BAE Systems Plc: overview
7.2.2. BAE Systems Plc: products and services
7.2.3. BAE Systems Plc: recent announcements and strategic initiatives
7.2.4. BAE Systems Plc: alliances
7.2.5. BAE Systems Plc: recent contract wins
7.2.6. BAE Systems Plc: financial analysis
7.2.7. Airbus Group: overview
7.2.8. Airbus Group: products
7.2.9. Airbus Group: recent announcement and strategic initiatives
7.2.10. Airbus Group: alliances
7.2.11. Airbus Group: recent contract wins
7.2.12. Airbus Group: financial analysis
7.2.13. General Dynamics Corporation: overview
7.2.14. General Dynamics Corporation: products and services
7.2.15. General Dynamics Corporation: alliances
7.2.16. General Dynamics Corporation: recent contract wins
7.2.17. Lockheed Martin: overview
7.2.18. Lockheed Martin: products
7.2.19. Lockheed Martin: recent announcements and strategic initiatives
7.2.20. Lockheed Martin: alliances
7.2.21. Lockheed Martin: recent contract wins
7.2.22. Lockheed Martin: Financial Analysis
7.2.23. Science Applications International Corporation: overview
7.2.24. Science Applications International Corporation: products
7.2.25. Science Application International Corp. (SAIC): recent contracts and strategic initiatives
7.2.26. Science Applications International Corporation: alliances
7.2.27. Science Applications International Corporation: recent contract wins
7.2.28. Sikorsky Aircraft Corporation: overview
7.2.29. Sikorsky Aircraft Corporation: products
7.2.30. Sikorsky Aircraft Corporation: recent announcements and strategic initiatives
7.2.31. Sikorsky Aircraft Corporation: alliances
7.2.32. Sikorsky Aircraft Corporation: recent contract wins
7.2.33. Thales: overview
7.2.34. Thales: products
7.2.35. Thales: recent announcements and strategic initiatives
7.2.36. Thales: alliances
7.2.37. Thales: recent contract wins
7.2.38. Boeing: overview
7.2.39. Boeing: products and services
7.2.40. Boeing: recent announcements and strategic initiatives
7.2.41. Boeing: alliances
7.2.42. Boeing: recent contract wins
7.2.43. Northrop Grumman Corporation: overview
7.2.44. Northrop Grumman Corporation: products
7.2.45. Northrop Grumman Corporation: recent announcements and strategic initiatives
7.2.46. Northrop Grumman Corporation: alliances
7.2.47. Northrop Grumman Corporation: recent contract wins
7.3. Key Domestic Companies
7.3.1. Advanced Electronics Company: overview
7.3.2. Advanced Electronics Company: services
7.3.3. Advanced Electronics Company: recent announcements and strategic initiatives
7.3.4. Advanced Electronics Company: alliances
7.3.5. Advanced Electronics Company: recent contract wins
7.3.6. Al Salam Aircraft Company: overview
7.3.7. Al Salam Aircraft Company: products and services
7.3.8. Al Salam Aircraft Company: alliances
7.3.9. Al Salam Aircraft Company: recent contract wins
8. Business Environment and Country Risk
8.1. Economic Performance
8.1.1. GDP per Capita
8.1.2. Gross Domestic Product
8.1.3. Exports of goods and services LCU Bn
8.1.4. Imports of goods and services, LCU Bn
8.1.5. Gross National Disposable Income
8.1.6. Market Capitalization of listed companies (US$ Bn)
8.1.7. Market Capitalization of listed companies (as a % of GDP)
8.1.8. Goods Exports as a % of GDP
8.1.9. Goods Imports as a % of GDP
8.1.10. Services Imports as a % of GDP
8.1.11. Services Exports as a % of GDP
8.1.12. Net Foreign Direct Investment (current US$ Bn)
8.1.13. Net FDI as a % of GDP
8.1.14. Mining, Manufacturing, Utilities Output (LCU Bn)
9. Appendix
9.1. About SDI
9.2. Disclaimer
List of Tables
Table 1: The Saudi Arabian Land Forces Strength (Including National Guard)
Table 2: Saudi Arabian Navy Strength
Table 3: Saudi Arabia Air Force Strength
Table 4: Saudi Arabian - Ongoing Development and Procurement Programs
Table 5: Saudi Arabian - Future Procurement Programs*
Table 6: Saudi Arabian Defense Expenditure (SAR billion and US$ billion), 2013-2022
Table 7: Saudi Arabia GDP Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2022
Table 8: Saudi Arabia Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 9: Saudi Arabia Defense Capital Expenditure (SAR billion and US$ billion), 2013-2022
Table 10: Saudi Arabian Per-Capita Defense Expenditure (US$), 2013-2022
Table 11: Saudi Arabian Homeland Security Expenditure (SAR billion & US$ billion), 2013-2022
Table 12: Terrorism Index, 2017
Table 13: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 14: Saudi Arabia - Offset Guidelines and Agreements
Table 15: Saudi Arabian Budget Formation Timetable
Table 16: Market Entry by Key Foreign Competitors
Table 17: Competitive Landscape of the Saudi Arabian Defense Industry
Table 18: BAE Systems Plc. - Product Focus
Table 19: BAE Systems Plc. - Alliances
Table 20: BAE Systems Plc. - Recent Contract Wins
Table 21: Airbus Group - Product Focus
Table 22: Airbus Group- Alliances
Table 23:Airbus Group- Recent Contract Wins
Table 24: General Dynamics Corporation - Product Focus
Table 25: General Dynamics Corporation - Alliances
Table 26: General Dynamics Corporation - Recent Contract Wins
Table 27: Lockheed Martin - Product Focus
Table 28: Lockheed Martin - Alliances
Table 29: Lockheed Martin - Recent Contract Wins
Table 30: Science Application International Corp. (SAIC) - Product Focus
Table 31: Science Applications International Corporation - Alliances
Table 32: Science Applications International Corporation - Recent Contract Wins
Table 33: Sikorsky Aircraft Corporation - Product Focus
Table 34: Sikorsky Aircraft Corporation - Alliances
Table 35: Sikorsky Aircraft Corporation - Recent Contract Wins
Table 36: Thales - Product Focus
Table 37: Thales - Alliances
Table 38: Thales - Recent Contract Wins
Table 39: Boeing - Product Focus
Table 40: Boeing - Alliances
Table 41: Boeing - Recent Contract Wins
Table 42: Northrop Grumman - Product Focus
Table 43: Northrop Grumman Corporation - Alliances
Table 44: Northrop Grumman Corporation - Recent Contract Wins
Table 45: Advanced Electronics Company - Product Focus
Table 46: Advanced Electronics Company - Alliances
Table 47: Advanced Electronics Company - Recent Contract Wins
Table 48: Al Salam Aircraft Company - product focus
Table 49: Al Salam Aircraft Company - Alliances
Table 50: Al Salam Aircraft Company - Recent Contract Wins
List of Figures
Figure 1: Saudi Arabian Defense Expenditure (SAR Billion), 2013-2022
Figure 2: Saudi Arabian Defense Expenditure (US$ Billion), 2013-2022
Figure 3: Saudi Arabian GDP Growth vs. Defense Expenditures Percentage of GDP Growth, 2013-2022
Figure 4:Saudi Arabian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: Saudi Arabian Capital Expenditure (in SAR Billion), 2013-2022
Figure 6: Saudi Arabian Defense Capital Expenditure (US$ billion), 2013-2022
Figure 7: Saudi Arabian Per Capita Defense Expenditure (US$), 2013-2022
Figure 8: Saudi Arabian Homeland Security Expenditure (SAR Billion), 2013-2022
Figure 9: Saudi Arabian Homeland Security Expenditure (US$ billion), 2013-2022
Figure 10: Terrorism Heat Map, 2017
Figure 11: Terrorism Index, 2017
Figure 12: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022
Figure 14: Benchmarking with Large Defense Spenders as % of GDP - 2017
Figure 15: Fighters & Multi-Role Aircraft Market Size (US$ Million), 2017-2027
Figure 16: Infrastructure Construction Market Size (US$ Million), 2017-2027
Figure 17: Facilities Management Market Size (US$ Million), 2017-2027
Figure 18: Saudi Arabian Defense Import Trend, 2012-2016 (TIV values)
Figure 19: Saudi Arabian Defense Imports by Country (%), 2012-2016
Figure 20: Saudi Arabian Defense Imports by Weapon Category (%), 2012-2016
Figure 21: Industry Dynamics - Porter’s Five Forces Analysis
Figure 22: Saudi Arabia - military chain of command
Figure 23: BAE Systems - Revenue Trend Analysis (GBP Billion), 2012-2016
Figure 24: BAE Systems - Operating Profit Trend Analysis (GBP Billion), 2012-2016
Figure 25: BAE Systems - Net Profit Trend Analysis (GBP billion), 2012-2016
Figure 26: Airbus Group - Revenue Trend Analysis (EUR Billion), 2012-2016
Figure 27: Airbus Group - Operating Profit Trend Analysis (EUR Billion), 2012-2016
Figure 28: Airbus Group - Net Profit Trend Analysis (EUR Billion), 2012-2016
Figure 29: Lockheed Martin - Revenue Trend Analysis (US$ Billion), 2012-2016
Figure 30: Lockheed Martin - Operating Profit Trend Analysis (US$ Billion), 2012-2016
Figure 31: Lockheed Martin - Net Profit Trend Analysis (US$ Billion), 2012-2016
Figure 32: Saudi Arabian GDP per Capita (US$), 2016-2025
Figure 33: Saudi Arabian GDP (current US$ bn), 2016-2025
Figure 34: Saudi Arabian Exports of goods and services (current LCU Bn), 2005-2014
Figure 35: Saudi Arabian Imports of goods and services (current LCU Bn), 2005-2014
Figure 36: Saudi Arabian Gross National disposable income (US$ Bn), 2005-2014
Figure 37: Saudi Arabian Market Capitalization of listed companies (US$ Bn), 2005-2012
Figure 38: Saudi Arabian Market Capitalization of listed companies (as a % of GDP), 2005-2012
Figure 39: Saudi Arabian Goods exports as a % of GDP, 2005-2014
Figure 40: Saudi Arabian Goods Imports as a % of GDP, 2005-2014
Figure 41: Saudi Arabian Services Imports as a % of GDP, 2005-2014
Figure 42: Saudi Services Exports as a % of GDP, 2005-2014
Figure 43: Saudi Arabian net Foreign Direct Investment (current US$ Bn), 2005-2014
Figure 44: Saudi Arabian Net FDI as a % of GDP, 2005-2014
Figure 45: Saudi Arabian Mining, Manufacturing, Utilities Output (LCU Bn), 2005-2014

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