WORLD DEFENSE SHOW 2024 — Both indoors and out, it’s nearly impossible to miss the presence of Saudi Arabian Military Industries (SAMI) at this year’s World Defense Show in Riyadh, where the organization is displaying a host of defense platforms, some still under development, that have come under its umbrella over the past years.
The displays match the ambition that SAMI CEO Walid Abukhaled says he has for the organization, namely to become one of the top 25 defense contractors in the world — by partnering with international firms, localizing as much production as possible in the Kingdom and snatching up valuable assets, like what Abukhaled said was a virtually finished purchase of the Saudi firm Alsalam Aerospace Industries.
At WDS 2024, Breaking Defense sat down with Abukhaled to talk about that acquisition, the progression of a deal for Turkish drones and his vision for SAMI’s future.
This interview was edited for length and clarity.
BREAKING DEFENSE: Where is SAMI now, six years after its inception?
We started our operation in January 2018. Last WDS was in March 2022. Our employees were about 2,500. Since then, our revenue has been growing 21 percent year over year, and we have now a backlog of about 15 billion riyal [$4 billion]. We won contracts last year about 9 billion riyal.
We are in absolutely the right way to become one of the top 25 defense companies in the world by 2030. This is a key objective for us. The other key objective is to localize about 50 percent of the defense spending by 2030. [At the] last World Defense Show the vast majority of the products here were from our partners and international partners with some localization from SAMI. In this World Defense Show, only two years [later], you will find the majority of the products we’re displaying in our booth are SAMI-owned products.
Whether it’s a vehicle land vehicle, a futuristic UAV that is a concept, some C4I systems, C2 systems, smaller versions of UAVs, converting a manned boat to unmanned boat — we’ve done it, it’s us. The shift is already happening.
And I’m extremely proud to say since the inception of SAMI, we became one of the top 100 defense companies in the world. [At the] last World Defense Show we were not in the map at all In 2022. After four years of starting operation we became number 98. This last year we climbed 19 position now we are number 79 globally.
As you are working on localizing 50 percent of defense spending, what is Saudi Arabia’s localization percentage now?
Kingdom-wise, when Vision 2030 was launched, [localization] was about 3 percent. What was announced by GAMI, [it’s] about 15 or 16 percent, if not 17. In SAMI, all the contracts that we’ve signed… .We met the commitment for 50 percent Localization, 50 percent when each contract finished, but the average is about 50 percent that we committed to.
What are the updates on technology transfer agreement with [Turkey’s] Baykar for Akinci UAV? Did you [establish] the production lines and what is the timeline?
This is another advancement, the contract with Baykar has been announced between Ministry of Defense and Baykar for AKINCI aircraft. Part of the aircraft will be built initially in Turkey by Baykar and the rest of the aircraft will be built in here.
Before you ask me about the numbers I can’t [disclose them]. It’s up to [the Ministry of Defense] if they want to release the numbers. But all I can tell you [is that] a good number of the aircraft will be produced fully in the Kingdom of Saudi Arabia in SAMI’s facilities because we already have a facility for UAV, we are making a center of excellence for UAV, the production line is there. We’re working with Baykar to qualify the production lines to ensure all specialty type test equipment are there.
We are sending about 300 Saudi employees and engineers and technicians to Turkey to work with Baykar to get the right experience, [then] come back and build the aircraft here.
What about the IP [intellectual property]? Will it remain a Turkish IP? And what parts will SAMI manufacture in KSA?
The IP is a Turkish IP. We are purely building the aircraft in the Kingdom of Saudi Arabia. The aircraft will be fully manufactured in Saudi Arabia. [As for software], they might have a special engineers will come and work with us to build the software. If it’s already built, [we] will not do rebuild it, but the knowledge transfer will be there.
For example, the engines, we will not manufacture the engines from scratch. We will get the same engines. The body will be fully built here, [also] lots of the cabling and communication and avionics will be done in the Kingdom. Within the next two years we will start building the Akinci in Saudi Arabia.
Are you trying to have technology transfer from US-based or European companies?
I have 11 joint ventures, all of them with US and European companies, some of them with South Korean companies. Of course there is export control and ITAR issue that we have to respect, but of course we’re working with technology, transfer and production transfer with all my partners.
SAMI acquired a 30 percent stake of SAIC, a share-holder of Alsalam Aerospace Industries. Are you planning to acquire the whole firm? And what about Boeing that is also an Alsalam shareholder?
We are going to acquire Alsalam fully 100 percent, any minute we’re going to announce it. The SPA [share purchase agreement] has been signed assigned with all partners, we’re just waiting for the closing, which is a formality with ministries. With Boeing we have a joint venture with them, so all our efforts will be done through the JV, Alsamal will be 100 percent owned by SAMI.
What are SAMI’s efforts in the defense-related space sector?
Big defense companies in the world are involved in the space defense. We already are involved. We have an Advanced Electronic Division that works in communication, advanced satellite communication and navigation. It is already taking place, working on space related matters. This is the future of defense and we are proud of this capability. We are engaging with our partners and the customer in things related to space defense. In the next [World] Defense Show you will see things [have] progressed like you saw between this [edition] and the previous WDS.
Does SAMI plan to bring all local defense companies under its umbrella?
No, I want to do that the contrary. I want to create a very strong Saudi supply chain in defense.
The companies I acquire are because they were related [and] aligned to my strategy. I save time, and I united those companies to create efficiencies and values.
Now, our plan is to look outside the kingdom for capabilities and companies that might be of interest to us. It depends on our strategy [to buy foreign firms and move them to KSA or not]. For some of them, it might make perfect sense for them to move production lines to Saudi, [while] some of them say, no where it is, it’s perfect, let’s continue. I have five sectors — sea, air, land systems, advanced electronics and defense systems — [we are targeting] all of the five sectors. I’m a businessman. I look at the opportunity that makes business sense and I’ll go for it if it’s aligned to my strategy.
Aligned to you strategy, what capabilities do you think the Kingdom needs in the future?
The Kingdom is no different to any other country. You have to look at the global defense trends [and] global threats. For example, cybersecurity. Everyone is concerned about cybersecurity, [which] means it’s an area I have to focus on. Artificial intelligence and embedding [it] in defense system is a must everyone has to look at this, also anti-drone systems.
Other than investing in companies abroad, what is your next five-year plan?
[There is a] big focus [on] building, factories, facilities in the Kingdom, state-of-the-art in all sectors. Already now we investing 1 billion riyal in a land systems center of excellence for any vehicle. We built already a UAV center of excellence. Alsalam will provide us with the state-of-the-art great facilities for anything related to airframe.
We’re building a huge facility [for the] ammunition industrial complex, but it’s across the five sectors. My focus in the next five years to have state-of-the-art facilities here in the kingdom that can deliver to what the customer requires.
Number two, look at opportunities for export. Number three, invest in international companies, look at capabilities because SAMI has to be a global company. Number four, human capital to continue to develop our talent. We are so proud of the talent we have; 85 percent of the workforce are Saudis. We have about — at corporate — about 27 percent female. Across the group it’s about 16 percent female — mind you are working in a sector that had zero females five years ago.