ABU DHABI, United Arab Emirates — Despite the Biden administration’s recent freeze on two munition sales to Saudi Arabia as part of a new Yemen policy, one of the kingdom’s defense industry conglomerates has gone ahead with joint ventures with American firms Lockheed Martin and L3Harris Technologies.
The moves by Saudi Arabian Military Industries are part of the kingdom’s economic plan, Vision 2030, which aims boost the domestic industry and increase technology transfer into local sectors. And it is Walid Abukhaled, the CEO of SAMI, who is charged with accomplishing these goals.
Abukhaled became acting CEO in April 2020, taking over from Andreas Schwer, who had served in the top spot since January 2018. He took on the full position four months later. Defense News spoke with Abukhaled at this year’s International Defence Exhibition and Conference held in Abu Dhabi, where the executive discussed business acquisitions and joint ventures, the ongoing coronavirus pandemic, and how he differs from his predecessor.
This interview has been edited for length and clarity.
What are your plans for SAMI, and how do they differ from those of Andreas Schwer?
Whether it’s me, my predecessor or a future leader, there is a clear strategy set for SAMI with clear mandates. SAMI is the national defense champion, and there has never been a national defense champion before. In the past there was never a regulator for the defense industry; now we have the General Authority for Military Industries. At the board level there is a clear strategy on what SAMI should achieve and buy. We have a clear mandate by 2030 that we should achieve. My objective is to ensure SAMI becomes one of the top 25 defense companies in the world by 2030. The challenge put to our leadership is figuring out how we can expedite that and achieve it before 2030.
The localization of the defense industry plays a huge role in Vision 2030, and we believe the defense industry plays a huge role in the diversification of the economy. That’s where SAMI comes in — as the enabler for technology transfer and localization activities in anything related to the defense industry. We are establishing joint ventures with the top 10 companies in the world, with the companies who are committed, are keen to partner and grow with us to support their and our objectives. And at the same time we have acquisition plans to integrate the industry in the kingdom of Saudi Arabia. We continue down that path with original equipment manufacturer partnerships, and the acquisitions by SAMI will help deliver our mandate.
SAMI acquired the local firm Advanced Electronics Company in mid-2019. What will your next acquisition be?
We have a weapons and missiles division, an aeronautic division, [as well as units for] land systems and defense electronics, and soon we will be getting into naval systems because that’s so important to support the ecosystem, and having [a maintenance, repair and overhaul] MRO capability for engines will be a tremendous help.
We have already acquired a company called Aircraft Accessories and Components. They deal with all mechanical components. It manufactures landing gears, and their facility is one of the best. It has a presence in Africa, the Middle East, some parts of Europe and in Asia.
We will continue with acquisitions to support the MRO capability we’re building in the kingdom. We’re keen to get into rotorcraft capabilities, and we’re looking for UAVs. We are in discussion with the Middle East Propulsion Company to explore opportunities. If the investment doesn’t happen, we will [take a] green-field [investment approach].
How has the spread of COVID-19 affected SAMI’S business model, production lines and facilities? How do you think the defense market will look in the aftermath of the pandemic?
2020 globally has been a bad year. But for SAMI, the opposite — it has been a great one. We managed to win a couple of strategic contracts for armed forces’ missile defense. We moved to a new headquarters in 2020, built a very healthy pipeline of business opportunities, and we concluded the year by finalizing the acquisition of AEC, which we call “the jewel of the defense companies of Saudi Arabia.”
So we’ve set a very strong foundation for growth. In 2021, I’m positive about continuing to win and execute some of the programs we’ve won.
SAMI’s business plan is to roll out production lines between 2019 and 2030, which is phase 2 of the company’s plan. How is that phase going, and what has SAMI achieved so far?
The work in phase 2 is going very well. We have a production line running for Aircraft Accessories and Components based in Jeddah, Saudi Arabia. We have one of the best production lines of defense electronics by AEC. And SAMI Navantia Naval Industries — one of our joint ventures — launched three ships. So the program is going exactly as planned, we’re delivering on the commitments we made before.
There will be new production lines related to certain contracts, and growth will go on not only at the level of SAMI’s holdings but for our subsidiaries, and this is a result of the joint ventures we are establishing with the top 10 largest companies.
What is the significance of the AEC acquisition? And what projects do you have planned with L3Harris?
AEC has 32 years of experience, 2,200 employees (5,000 of which are engineers with experience dealing with defense electronics) at 85 percent Saudization [Saudi nationals], and seven production lines. The company already has a great relationship with the customer community and OEMs [original equipment manufacturers]. This acquisition is really significant because it immediately brings capability, expertise, knowledge and customer relations to SAMI. In return, our joint ventures with the OEMs will enable this company to grow more — a lot faster than anticipated — and provide it with capabilities it didn’t have before.
L3Harris was the very first U.S.-based defense company to sign a joint venture with SAMI. Soon we will announce very big contracts for the joint venture related to software-defined radios), with SAMI and AEC working on this project.
Also, with Lockheed Martin, there is a huge scope [for cooperation]. We’re working together to bring capability to the kingdom.
How does SAMI contribute to securing Saudi Arabia’s borders? What happened to the missile defense project that SAMI was working on with international partners?
We have a joint venture with Thales for air defense contracts, and part of that deal involves localization. We’re working closely with Thales to ensure that we bring in capability and build it within SAMI through the joint venture.
Armed forces protect the borders, and we serve them by providing technology that makes their job easier. We provide the capability for maintenance, repair and overhaul, make repairs on the spot, and ensure [parts are delivered on time].
The Biden administration is taking a harder stance than its predecessor when it comes to Saudi Arabia. Will SAMI diversify its joint ventures by perhaps working with Chinese companies if it proves difficult to work with American businesses?
I’m not seeing any difficulty in securing joint ventures with U.S. companies. I’m continuing to stick with my partners, and we are going to grow together in the region, hand in hand. If we have challenges, we will help each other overcome them. I have no plan to go outside my current partners, geographically. At the end of the day, I’m a national defense champion. There is no plan to switch to Chinese companies for cooperation.