Saudi Arabia is moving rapidly and steadily toward building a comprehensive industrial system, surpassing ambitions of mere assembly and importation, but aiming to establish robust engineering capabilities capable of resilience and competition.
This was revealed by a recent report issued by Alvarez & Marsal, and confirmed by Andrea Di Lello, Senior Director of Strategy and Performance Improvement at the company, in an interview with Asharq Al-Awsat.
Saudi localization efforts are distributed across highly strategic sectors, including space, aviation, automotive, shipbuilding, information technology, artificial intelligence, and financial technology. In each of these sectors, local projects connect with major international partnerships, reflecting the depth of the ongoing transformation.
In the aerospace and aviation sector, the Saudi Arabian Military Industries (SAMI) has started locally producing spare parts for F-15 aircraft and airborne electronics systems, while Boeing, Lockheed Martin, and Airbus have signed localization agreements targeting 50% local content. The numbers here tell a remarkable story of growth; the actual localization rate has increased from 4 percent in 2018 to about 20 percent today.
However, Di Lello put these numbers in their proper context, saying agreements with international partners have laid the initial foundations by building operational capabilities and developing advanced infrastructure for maintenance, repair, and overhaul.
He warned that the next phase, which is building engineering capabilities in design and systems integration, is the true added value, and this is where the greatest opportunities lie.
Factories shaping a different future
At the King Abdullah Economic City, Lucid Motors opened the first car factory in the history of the Kingdom, while Ceer Motors is seeking to design and manufacture electric cars locally, and SNAM continues to assemble commercial vehicles with ambitions to transition to full manufacturing.
Asked about the realistic timelines for achieving independence in innovation in these sectors, Di Lello explained that tangible progress can be made within five years.
The critical factor is not the time itself, but the quality of execution, which includes the true definition of achievement and how the knowledge transfer process is organized, he added.
As for the shipbuilding sector, it is based on an ambitious pillar, the King Salman Global Maritime Industries Complex, which aims to localize more than 50 percent of construction activities and drilling platform manufacturing. This is supported by a joint venture with the Korea’s Hyundai Group, which aims to manufacture ship engines and their structural components.
Di Lillo described the complex as a "world-class facility," noting that long-term agreements with major local buyers provide a commercial foundation that is not usually available to most emerging countries in this sector.
The Alvarez & Marsal report does not hide the existing gaps. Di Lillo described them when discussing the readiness of local suppliers, saying that the priority today is to move from an assembly phase to a more mature phase based on independent design, systems integration, and the ability to grant certifications.
He identified the most urgent needs as building a base of "first-tier" suppliers capable of designing complex components and developing local engineering expertise able to modify products and certify them technically.
Regarding joint training programs with global companies, Di Lillo set a fundamental condition for their success, explaining that the programs most capable of producing sustainable outcomes are those that include clear engineering milestones, binding commitments to transfer technology, and a graduated pathway that moves trainees from operational training to possessing design capabilities.
He recommended that future agreements should guarantee clear qualitative outputs, not just participation targets.
The report paid special attention to one competitive advantage: Saudi Arabia’s capabilities in information technology and artificial intelligence. Di Lillo said these capabilities place the Kingdom in an advanced position in terms of readiness for innovation and adoption of modern technologies.
Research and development
The Kingdom currently invests about 0.56 percent of its GDP in research and development, a figure that has grown by more than 30 percent year on year.
Di Lillo stressed that the real opportunity now lies in ensuring that this growing investment is converted increasingly into applied industrial R&D, yielding strong and tangible results in trade and manufacturing.
The report does not overlook external risks, noting that fluctuations in oil prices and tensions in international trade may affect investment flows. However, it viewed these challenges as opportunities to attract talent and highly experienced small and medium-sized enterprises.
The report described the current phase as moving beyond the initial setup and establishment stages to approach “environmental maturity,” which is the third phase of localization. This phase focuses on building unique local knowledge capabilities and includes strengthening self-sustaining companies, establishing innovation centers, deepening local supply chains, and fostering partnerships between universities and industry.
