Market Trends of GCC Defense Industry
Airforce Segment to Dominate Market Share During the Forecast Period
- The air force segment is expected to experience significant growth in the GCC defense market owing to various procurement plans for replacing aging combat aircraft and new unmanned aerial vehicles. The demand for this segment is driven by the annual investment in defense, which is geared toward bolstering its military capabilities to counter emerging threats. For instance, in 2023, defense expenditures in GCC countries such as Saudi Arabia, Kuwait, Oman, and Bahrain rose by USD 90.8 billion. This was a growth of 5.2% compared to 2022, which accounted for USD 86.3 billion.
- With this increasing defense spending, several countries in the GCC are planning to procure new military aircraft to bolster their defense. For instance, in February 2024, Airbus announced that it is in talks with Saudi Arabia to procure A330 Multi-Role Tanker Transport and A400M military transport aircraft. Similarly, in February 2024, Saudi Arabia announced it is considering procuring Boeing’s F-15EX to equip its air force.
- In addition, various GCC countries have outstanding orders for new military aircraft to ensure security in the Arabian Gulf. For instance, Bahrain is set to receive the latest F-16s in 2024, with the rest slated for 2025. On this note, in March 2024, the first F-16 Block 70 Fighting Falcon aircraft was delivered to the country. The Block 70/72 variant has advanced avionics, an active electronically scanned array (AESA) radar, conformal fuel tanks, a modernized cockpit featuring new safety measures, an extended structural service life of 12,000 hours, advanced weaponry, and improved engine performance. Its ability to track and intercept drones is of particular significance, enhancing Bahrain's participation in the international coalition's efforts to maintain peace and stability. Such factors are expected to drive the demand for the segment in the region during the forecast period.
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Saudi Arabia to Exhibit the Highest Market Share
- Saudi Arabia’s defense industry is a robust sector supported by substantial investment to modernize the country’s military capabilities in a geopolitically unstable region. With a strategic focus on modernizing defense capabilities, Saudi Arabia consistently allocates a significant portion of its budget to defense. The defense budget is further highlighted by Saudi’s Vision 2030 initiative, which aims to diversify the economy and increase indigenous manufacturing capabilities. For instance, according to SIPRI, Saudi Arabia's military spending in 2023 amounted to USD 75.8 billion, marking a 15% increase from 2019 and a 7% increase from 2022.
- With this rising defense spending, the nation is investing in the procurement of ammunition, cutting-edge missile defense systems, surveillance equipment, and cybersecurity solutions to counter evolving threats. For instance, in February 2024, NTGS, the manufacturer of the ALAKRAN mobile mortar system, signed a partnership agreement with ERAF Group to manufacture and integrate ALAKRAN mortar systems locally in the country. The ALAKRAN 120 mm mortar is a highly mobile, lightweight, self-propelled system designed to be mounted without reinforcement on any light utility vehicle able to carry a 1,500 kg payload.
- Similarly, in February 2024, Saudi Arabia awarded a contract to LIG Nex1 to deliver ten KM-SAM Block II medium-range air defense system batteries for USD 3.2 billion. The KM-SAM system, also known as Cheongung in Korea, is South Korea’s medium-range air defense system developed by the Agency for Defense Development (ADD) with technical assistance from the renowned Russian defense firm Almaz-Antey, known for its development of the S-300, S-400, and the latest S-500 air defense systems. In addition, in May 2023, MBDA was awarded a USD 65 million FMS contract by the US to produce the Common Anti-Air Module Missile (CAMM) for Saudi Arabia’s Multi-Mission Surface Combatants (MMSC) vessels.
- Furthermore, Saudi Arabia has signed various collaboration agreements with multiple defense OEMs to bolster the country's defense capabilities. For instance, in February 2024, Leonardo signed an MoU for aerospace and defense collaboration opportunities. This MoU also offers the parties a focus on specialized areas of collaboration in both Combat Air and Cross-Domain Integration fields, where Leonardo is active on next-generation technology initiatives and enabling demonstration projects. These areas could include uncrewed systems, integrated sensors, digital technologies, industrialization processes, and human capital development. Such developments are expected to accelerate the growth of the country's defense market during the forecast period.
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